Matthias Ruth on Entropy Law and Economics

[Music] uh my name is Doo T I teach economics in the school please don't hold that against me uh it is both my privilege and my pleasure to introduce you to professor mati as Ruth who I got to know somewhere around the mid90s 1990s uh he was a young man then uh he still looks young uh despite his youth at that time he was a very intellectually mature person uh and he Still continues to be that mature person uh I can go on talking about Maas but you are not here to listen to me talk

about Maas but you are here to listen to Maas talk to you uh but one thing that he is well known for is uh systems modeling and those of you who've done systems modeling and heard of this program called Stella uh he was the architect behind that and the other notable achievement that he has done for which most of us in environmental Economics are grateful for is the establishment of this journal of ecological economics now without holding any further I'll pass you on to Matas well thank thanks everyone for being here um I have to

say I'm very pleased to see so many people come to a talk that starts with the word entropy um which either means um that you don't really know what entropy is or or there is something in it that You that you actually might find of relevance and what I'm trying to do over the course of the next roughly 45 minutes is to actually try to explain to all of you who may not really know what it is about what it is about and uh why it's relevant and for all of you who already know about

it uh give you sort of my take and I'm trying to be actually a little bit provocative trying to give you my take of the role of the entropy law of laws of thermodynamics in general In economic decision- making so here's what I'm going to do to start with so the first roughly 10 15 minutes I want to actually spend sort of laying out in a very structured way the two different World Views the one from physics or more specifically thermodynamics which is the discipline that deals with the transformation of materials and energy from one

form in another which basically means all natural processes sort of are governed by the law of thermodynamics so I'll spend a little time on that and then contrast this with the way in which economists think about systems and processes and sort of put them side by side and then once we've done that then I want to talk a little bit more specifically about thermodynamics and the entropy law in particular why we should be concerned with it and then last but not least I'll actually being at a policy school here want to draw some policy implications

out of all of That and those are policy implications of a real world policy but it also goes a little deeper to what it means to do economics as a basis for policy decision- making for policy analysis so typically an engineer or physicist or thermodynamic would start with system boundaries before they do anything before they describe what the processes are about and how they transform materials and energy and there are typically three kinds of systems that Are distinguished there are isolated systems these are the ones where neither material or energy crosses the system boundaries then

there are closed systems where energy can cross the boundaries but material doesn't so a closed an example of a closed system would be for example our globe so if you take away sort of the odd satellite that we shoot out into outer space or the OD meteorite that falls onto the Earth you know these are really small quantities and Mass Terms compared to the Earth itself so if you you know you can think of the Earth really as a closed materially closed system and then there are open systems where materials and energy both you know

leave come and go through the system boundaries it's really important to have those three different kinds of systems in mind to very carefully Define what the laws are of physics of thermodynamics that apply to them because different laws have different Meanings based on the system that you use so if you have an isolated system for example or a closed system if you have a closed system mass will always be constant in that system like on the clo for all intents and purposes the mass is constant if you have an isolated system that also the energy

will be constant because by definition no energy crosses the system boundary so inside the system the amount of energy is always constant the closed system assumption For the Earth for example has very clear implications for environmental problems in general that means all the stuff that is there will always be there in one form or another so materials that can transform from one form or another will always be there typically at the end of a process as a waste product in order to bring them back into the system and sort of reduce their wastefulness recycle them

for example reuse them requires energy to be drawn Into that system but the stuff is always around very important to keep in mind so it's not that you know you can get rid of it you got to at the beginning think about what to do with it after its useful life and so there are very large number of systems implications material use and recycling implications of the first law of thermodynamics the SE and which is the conservation of mass and energy law the second law of Thermodynamics applies to isolated systems and it says that in

an isolated system so one where neither material or energy acrossing the system boundaries the order of the system as natural processes occur will decline so disorder will increase so if you have two systems that are brought in contact with each other after while mixing will happen uh diffusion of energy in the term of friction or heat transfer all of this will happen and ultimately once you Start it out with some ordered system ultimately you will end up with sort of a disordered system and at that point at which Maximum disorder is reached we typically talk

of heat death meaning no process can occur anymore because there are no gradients in the system that help drive any new processes of course the real world the Earth is not an isolated system so thank goodness we are getting permanently an influx of energy that helps us to Separate out all of those things that are being dispersed throughout the process but what we do in economic processes is really increase typically increase order on the basis of the energy that we can draw on right now to a very large extent we draw on the energy that

has been accumulated in fuels in biomass uh but once we're sort of depleting those resources increasingly we need to transfer over our Energy Systems to those that are Much more sustainably using the influx of solar and wind and and other actually available resources so if you take this little chart you know think of it um as an example for a mining operation that takes the ore out of the ground so that was somewhat dissipated materials in the ground we take that out and we create let's say iron ore so it's a little bit more concentrated

when than what you find in the US crust and then through Mining and smelting and refining Processes you create ever more order in the system in the economy and a lot of the economic processes are really designed to do exactly that and and a disproportionately larger amount of disorder gets generated so every time we upgrade the ore to a more and more useful State we downgrade the resources of energy for example used to do this and ever more disorder is being generated that then ultimately leads to leave the system in the form of waste Heat

into the atmosphere into water bodies into the oceans into rivers lakes streams and so on this is in part the reason why we have global climate change because we are creating ever more waste heat that's ultimately being trapped actually inside the atmosphere and I'll come back to this later in the 1960s and70s Ilia prosen and another sort of group of researchers around him have studied in Fair detail How order can get generated out of disorder and virtually all natural processes are focused on that so the biomass that you see out there the beautiful plants the

trees the living systems they are really very much distinguishable from the rest of sort of the average concentration of materials that are out there they are beautiful they are different they are ordered but I want to make a point that not all economic and natural processes have the Goal of creating order some of them actually have the goal of creating disorder uh I suspect some of you in here like milkshakes or smoothies right um if you want to do this I think the ideal milkshake wouldn't be one where you have the milk and let's say

a banana floating in it and some ice cream floating in no the most desirable milkshake would be the one where everything's mixed very nicely together right so I want to make that point that It's really important to recognize that not all that it's not the purpose of all economic processes to create disorder but in some cases actually the goal is to create disorder but creating that disorder also requires creating even more disorder in the environment in terms of the energy and other materials that you need in uh in order to do this so that's one

important recognition another important recognition is that when we're talking about energy and Material sort of and and efficiency uh tradeoffs there there are lots of other trade-offs that we need to think about when we describe from a physical perspective what the economy or economic processes are doing and here's a little sort of triangle that goes back to a guy called Daniel spring he was at the ET AG in surich in in Switzerland an engineer and physicist and his point was that yeah we could become ideally efficient perfectly Efficient if we approached very slow process if

we were very very carefully conducting these uh transformations of energy and materials in a in an orderly in an organized way so the laws of thermodynamics actually tell you that the slower process occurs the more careful you are the less waste products you generate as a matter of fact all of you know about this you have heard about the usual phrase that you know haste makes waste well the faster Things occur the more waste get generated so there's a trade-off between the energy waste and the material waste on the one hand and the time it

takes to carry out a process and so it's one part of this triangle and the other one the I stands for information if you have more information when you know exactly where the waste products go then it's much easier to collect them back and bring them back into the system and so real world processes have a particular speed They have a particular efficiency and they have a particular embodied information or knowledge uh that describes them and if we increase the knowledge about them then we can speed them up or we can become more efficient or

maybe even both and so there is this trade-off not just what the engineers typically were thinking about energy and material conversions but it's really Energy Information and time that are always traded off against each other in Economic processes and obviously that makes an econ that makes an physical analysis of transformation processes even more complicated and difficult to carry out so so much on so some basic physics how engineers and thermodynamics think about material and energy conversion um now to somewhat different way of looking at the world and it's the economist's way of looking at world

and here typically we also start with systems or a usual uh model you know Some of the oldest economic models going back to Adam Smith identified firms and households producers and consumers and identified the relationships between them sort of like the systems that we describe in Engineering Process and then the exchanges are not materials and energy sort of in a generic form but really it's labor it's Capital it's land that the households hold that made that are made available to to the firms to then produce desired products that go Back to the households and so

you have what's known circular flow model and if you want to describe the economy in that way it's really tedious because there are shoes and there are VCRs and there are iPods and there are who knows what kinds of products that you all need to keep track of but life gets so much easier if you just look at the monetary flows that connect the two systems right so households give up labor to firms but in return they get wages and for the Other productive services that they provide they get interest payments they get rents and

so on and the firms sort of a counterflow to the products that they generate and make available to the households get in return a monetary flow of purchases right this is sort of the standard economic model nothing nothing new and exciting about this this little model uh you know sort of describes you know the sing you know 18th century economists But you know as Adam Smith already back then pointed out it's really difficult with this understanding to describe how economies grow how they develop how they structurally change and in order to do this you really

need another sector in there that temporarily can hold some of the excess resources some of the savings that are made available by households and then give them out as loans for example to firms so that they can build up their Capital stock so that they can Produce more goods and services they can hire more labor and then can provide more wages and more interest payments and more rents and so on which then stimulates the demand for the products that are generated that's what's known as Sal law right and so you have an expanded circular economy

that now with this sort of mindset actually can help describe in a fairly sophisticated way how economies grow and develop and that really is sort of the Fundamental basis of a lot of the economics macroeconomics that we still use today you know 200 years later um and you know we do this in an everyday sort of um analysis uh so if countries calculate their GDP you know it's typically you know the value of all the production that goes on in these two different sectors you know producers and consumers um and in this case you know

I gave you a little you know this is from the 1980s that tells you how old I am so One of my old textbooks um a little description of how you would calculate for example the value that's get that's generated through production right and so you have let's say a farming operation that's the wheat production you know let's say $15 you pay for that and then out of this ultimately you know the wheat goes to mils to make flour you know the value of that is $40 and then bread production and then ultimately the bread

gets sold to Consumers and then You know at the price of 85 for you know a certain quantity so that's how we sort of calculate there one way to calculate GDP ultimately that we look at all of these different levels of production and look at the end and say well this is the value of all the goods and services or you can do this on a value added basis you can say well the value added in wheat production was 15 the value added then at the flower production was 25 and so on and then at

the end if you sum These all up on the value added basis you need to come up you know sort of identity here with the final value of the product this is all trivial I know this but I put this up here because I want to ask you what's wrong with this is there anything wrong with this well when I say is there anything wrong with this it's sounds like a rhetorical question right so the environment where the soils the water The atmosphere all of which make possible the growth of wheat has no value associated

with it right never shows up here it's really the moment it's all the things that the farmers do that has value that adds value the environment adds no value to this so in some sense the way in which we set up our economic model and the way in which we set up our accounting of what creates value in the economy at the very beginning in a very basic definitional Way excludes a lot of the contributions that the environment makes to it and obviously if you s sing ahead of where we are today uh there might

be a problem with this another so interesting way in which economists think about production is through production functions and I wrote down here you know one of the basic on that all of you must have seen at one point or another it's known as a cup ductless production function so on the Left hand side you have the output a quantity of output q and then it's a function of the capital and labor that goes into the production process and then there are little parameters the a that sort of helps you convert the units and tells

you something about the efficiency and then parameters Alpha and beta if you want to think of this as Q as the output of a whole economy like GDP and the alphas and betas are in essence the factor shares of the income Of capital and labor in your economy and then the a tells you something about the efficiency of how capital and labor get converted into output ultimately that's also very trivial and you can illustrate this you could say Hey you know this is like producing a cake you know you need the labor the cooks you

need the oven that's a capital and then out comes the product the cake I'll ask the same question what's wrong with that have you ever tried to bake a cake with just an Oven right it's really difficult right so you could obviously you need materials right you need eggs you need flour you need all kinds of other stuff that goes into cake sugar and so on right and so what many economists have done once they recognize oops yes materials are really important here they have expanded their production functions in ways to account for the materials

in just the same way in which they have accounted for Capital and labor okay and So you just put those in there and have a little own its exponent call it gamma and then you proceed with the same kind of analysis that you have before which is also problematic Alfred North Whitehead philosopher of science you know refer to this as the fallacy of misplaced concreteness you take one model that works perfectly fine for one setting like material sorry um Financial flows of capital and labor and the financial aspects associated with Production output and now you

sort of stick something else in there and use the same instrument to do the analysis to which it really wasn't designed and why there is a problem I want to illustrate with the example let's say if your cook doesn't have enough time let's say you can only hire them for half the time and maybe you only have half the eggs half the flour and half the milk what this equation tells you is well it's not a problem if you have Let's say twice the number of ovens you can substitute for the lack of inputs of

some of the others they are substit utable right and of course they are not but we're proceeding with our analysis as if they were right and I think there's a problem I suspect you recognize there's a problem so there is that basic issue with the economic description of production processes I'll come back to you know the physics behind this you know in a few minutes uh but Then there's another problem um Robert solo you know one of the most famous economists Noble laats uh you know developed what's now known as solos gross model which in

essence back then started there are now much more sophisticated versions of this but started with the same kind of cop doless production function that I showed before and then it specifically accounted also for the capital accumulation and I showed you in the uh uh little circular Uh economy model earlier and so the notion is that yes we can save put some of our income away as savings that then can get used to invest in New Capital which then ultimately as labor and the Capital stock grows can also lead to an increase in economic output and

uh you can make these Investments almost like a perpetual motion machine you can create more output that then allows for more savings which then allows for more Investments which then allows for more Output it happens all by itself as if materials and energy again were not an issue at all right and so we still today think that we can sustainably grow our economy meaning not drawing on resources on material stocks and not drawing them down while continuing to increase the economy and most of that sinking really goes back to in this case sort of a

model it was developed in the 1970s 19 late 1960s and early 1970s but there are other versions of that kind of sinking That are much more contemporary some of you might have heard of so-called environmental Kutz nitz curves right the kutzit curve itself you know goes back to um a Russian statistician and uh sociologist who actually sort of find found statistical relationships between the development of an economy and income inequality the same kind of thinking was applied to environmental issues where people said well you know if the per capita GDP goes up so if on

average we Get all a little richer then ultimately the environmental harm that we do will be able to be reduced so economies on the left hand side and you know the early analysis of did this just as a cross-sectional approach the early analysis I said well you know there are some economies the ones on the with the red dots here that are on the left hand side of this curve and they have uh low GDP per capita and they have low environmental harm that they do and then On the right hand side you know the

green ones you know we find those with high income per capita High GDP per capita and we find that their environmental harm is also low and so the notion is and was and still to some extent that that is around is driving policy by the World Bank and by many others is to say well all we need to do is make sure the ones on the left increase their income and by doing so move to the right and reduce the Environmental impact that they have there are so many problems with that kind of thinking for

one it assumes that the economies on the left can go through the same kind of transition that for example you up in the 19 in the 18 and 1900s did right none of this really happens the demographic transition processes the economic transition is all fundamentally different so it assumes that we can all sort of mimic those countries that already moved ahead in That curve but it also on a much deeper level assumes if you really think about this it assumes that growing the economy can help solve the problems that are caused by growing the economy

it's a little bit of a contradiction in here right but nevertheless that is sort of the kind of thinking that to a very large extent drives in know International Development uh agendas uh from a monetary or from a financial perspective also just as an aside for What I mentioned earlier the way we calculate GDP the environment has absolutely no contribution to it so there is an issue to this and in general GD is really not a good indicator of development it's really just an indicator of economic output right and so uh analyses that have been

carried out to actually look at indicators that are much more closely related to actual development cannot find any of these relationships no big surprise if you Take resources into account if you take material use into account if you take real development into account none of these curves really exist so there goes the basis for a lot of uh sorry for a lot of environmental for a lot of economic development policy I don't want to be too critical about economics I'll come back to you know all the great contribution but there is one more point that

I want to make a couple more quick points that one Of the key instruments that economists talk about is the price as a signal to consumers and producers what to do right if the price goes up there is an incentive to produce more of a product and then if produce if consumers buy more of it uh then they will drive up the price and then there is an incentive to produce more and so on or if the price goes down then you decide to produce so there are these movements along the demand and the supply

curves And likewise there are movements that can happen because for example your income changes so if the income goes up you might now be willing to pay a higher price for the same quantities right this is all standard basic introductory microeconomics but while the laws of thermodynamics earlier that I mentioned you know really tell you there is no reversibility you cannot ever go back up and down all the time without EXP spending more energy and more materials The traditional economic thinking assumes that you can sort of increase the income or decrease the income and you

move back and forth between these you know equilibrium points so again there is a mismatch between what we know from the law of physics about the real physical relationships and how we produce and consume and there is something very different in the way in which would describe consumption and production decisions from the economic Perspective and I just want to leave that there for a moment uh I also want to make a very important point that even if prices could allow you to provide these signals they are really not just a construct of production and consumption

prices really as all of you know are also a product of the social discourse of social structures of uh Power relationships within society and you know this little picture sort of illustrates how one part of society gets Encroached on by another but the ones you know people and their livelihoods that are represented on the right hand side many of their activities are not reflected in the marketplace and therefore their decisions are not reflected in the price mechanism While most of what's happening on the left probably is and so by virtue of having a society structured

in a way that many of the decisions don't make it on the marketplace the market price by itself Is only a very basic indicator of what could or should happen on the market itself right and so keeping these social that social context in mind is going to be really important too and then last but not least a lot of what the economic instruments have done up to date is really help identify the efficient use of scarce resources how do we allocate scarce resources across you know different Alternatives in the case of the country You know

where I live right now in the United States this and many other other places too has led to highly concentrated activities very large of trying to you know capitalize on economies of scale very large operations like power uh Supply systems like very large power plants that then get plopped here and there in the landscape across the country and then over long distance Supply uh electricity to my house and everyone else uh very efficient but not Robust what we now find and you know I envy you for your beautiful weather out there I still have about

a meter and so or so of snow in front of my house what we find is Downing of power lines uh what we find is uh Power interruptions uh many of these uh outcomes of the efficiency decision making really don't uh have a long-term impact on the robustness of the system We are Becoming ever more brittle ever more um focused on doing Le more with Fewer resources rather than generating for example redundancies there is very little in the economic instrument box tool box that leads you to develop redundancies there's a lot in there to help

identify these efficiencies which obviously then can have long-term sustainability challenges associated with it and then last but not least on that point of long-term sustainability challenges when economists try to describe what we Should do today to become sustainable over the long term uh is really focus towards an identification of investment and policy decisions today that then play out over a long period of time as if we would know the entire time Horizon over which for example we extract resources so this is a little graphic from hotellings model on the optimal extraction of scarce resources that

goes back to the 1930s that really still to very large extent determines the way in Which we decide on resources extraction processes today the decision is made at one point in time over an entire time Horizon as if everything were known the previous set of charts should indicate not everything is known climate change social change economic change political change all of these are unknowns that are fundamental to economic decision- making that really are not adequately represented in many of the instruments that we use for economic analysis how do You bring them together that's a real

big Challenge and not I have some answers to that but not all of those but the ones that I have I do want to share with you and then the rest is really a research agenda for many people uh and probably for many years to come so let me come back to the entropy law you know why is it relevant why should we concern ourselves with this and here are just a few sort of quick observations um the production function That I mentioned earlier sort of a cup ductless or any other almost any other type

of production functions you know we typically sort of you know I talked about you know substitutability so we typically have a few sort of data points on labor consumption and or labor use and material use so we have a few data points along these curves and then we interpolate and we extrapolate and we get these nice mathematical formulas on to which we then can unload our Mathematical instruments to do an analysis and so what we typically do then is you know derive these production production functions so here is an isoquant for one of those um

nice little curves that show us what these straight offs are if you begin take into account the physical constraints on production processes these curves might look very different so we know that for example to make a ton of Steel you need at a minimum a ton of materials to go into This as a matter of fact you need more than a ton significantly more than a ton almost close to two tons of materials if you count the Coke and the oxygen that you draw in and and on and on so there are minimum material requirements

that constrain the production process none of which are typically in taken into account in traditional economic production models which can totally change the analysis and a lot of the work that Doo referred to that I've done In the 1990 80s and '90s really was to impude physical laws into production um Theory basically of Economics to make these uh descriptions much more realistic um so that's one way to do this sort of take the physical insights adjust the functional forms to then arrive at a description that's much more meaningful that's actually consistent with the laws of

thermodynamics um over time uh what we often do in in economics they say well you know we become more Efficient we become more less material intensive and so we have learning curves so we'll start out we sort of you know let's say at one point in time or one level of cumulative production a certain material intensity and then we have a few more data points and then we'll use those with statistical analysis and we project out into the future what the ultimate in the longterm material efficiencies would look like and you see this you know

for a lot of different Technologies you know semiconductor Industries you I have these nice little learning curves uh you get them for the steel and paper and cement industry you name it so they're all out there and they're all based on you know this kind of sying if you take into account the fact that you have material requirements that cannot be surpassed or energy requirements that cannot be surpassed then you have another constrainted on the system that Then can change fundamentally your long-term Outlook and how efficient you can become let me just give you one

little example power generation the picture that I showed you earlier highly centralized power generation from fossil fuels the efficiency of this is about 43% 43.122762 Second Law efficiency so if you take all the qualitative changes of materials and energy into account of the whole US economy you want to venture guess how Efficient the whole economy as such is I'm not going to point at people but it's about 2% so work by Robert a showed that if you take into account all the materials and energy that get cranked through the system and all the disorder that

you generate along the way on that about two to 2 and a half depends how you look at it that's our efficiency and that really hasn't changed a lot in roughly the last 20 or 30 years either so these physical constraints are real And projecting out into the future what can happen and what we should do about it um you know is significantly influenced by this another really important point I want to make is that the economics and there's nothing fundamentally wrong with sort of doing economics if if you make sure that it's actually consistent

with the physical world world within which we live but what we typically do is really focus only on The Wanted on the desired Products that we generate the production function that I showed you earlier is a quantity of desired output right nothing in there tells you anything about the undesired output and so what a number an increasing number of people are now doing is supplementing those production functions those descriptions of what the economy is doing with material balances with energy balances with second law balance and of course this gets ever more complicated many of you

have had Economics before right suffered maybe through your microeconomics probably thought this was really all very hard and complicated and now there comes this guy and tells you okay this is good uh but now you have to take into account the physical laws as well and you have to create accounting balances for this as well it doesn't get any easier but if you want to do economics in a way that's cognizant of and respectful of the real world physical constraints on the the Material side and on the waste side there is no other way unless

you want to forget about all the unwanted byproducts so what the economics that we usually do really focuses on is really just one small part of the system my good old friend Herman daily uh likes to refer to as the economy as a wholly own subsidiary of the ecosystem there is no way of thinking about the economy without actually thinking about where all the materials and energy come from And where all the waste products ultimately go to the question is how do you do an economics how do you do a policy analysis in a way

that is consistent with this broader context that really takes into account resource use energy use waste generation recycling the influx of solar heat and then the outflux of waste heat back into space how do you do this becomes much more complicated okay and I have a few ideas and I want to share with you a few Of policy implications of this but before I do this I want let me actually go back to this so look at this picture just so take it in for a second okay and then I want to show you sort

of a different notion of how we balance the economy with society and with the environment that many of you might have heard of before the so-called triple bottom line you hear this a lot in the business world in the business context where people say well to become Sustainable means to do right by the business agenda right to grow your business but to do this in a way that we're mindful of the social context within which we do this we we provide Fair Labor we provide clean working environments healthy work safe working environments and we become

ever more efficient and so we're doing right by the economy as well so the triple bottom line is one where we're good with regard to social economic and environmental Issues and we become ever better in this I don't have a fundamental problem with that kind of thinking but what it typically turns out first on a fundamental level it still sort of assumes that there's a lot of the economy that can happen without Society or without the environment and and vice versa right so there of a fundamental um conceptual problem but then there's sort of a

real world problem if you focus on doing them all sort of separately and Not really thinking about an nested system where the economy is part of a society which is part of an ecosystem you do it in a different way you can fall into a variety of different traps and I sort of listed three here one is what's referred to as the rebound effect focusing increasingly on efficiency making things more efficient I'm not against this but what it typically means is that we use the efficiency gain really as a gain in Disposable income if your

car is more efficient you buy less fuel you have a little bit more money available what do you do with this maybe you drive a little more maybe you eat out more often maybe you buy a new shirt maybe you buy a new tie whatever it is you do something that also requires energy right this is what's referred to as the rebound effect at a large scale if you grow your economy and you can do this because you become ever more efficient Then you have more resources to grow the economy right and often times that

goes at the expense of society and or the environment another trap that we often think about that we fall into is that we say well all we need to do is in developing countries instead of having to go through the whole tedious and arduous development process that you know England and Germany and you know Europe and so on have gone through in the 18 and 1900s they can sort of Technologically leap frog and the example that we often hear is of Africa where no one's putting landlines into the ground for telecommunication right it's all cellular

based right we're jumping one or more of these development stages that we have seen elsewhere so that's a Lea frogging argument well if you go around the world and you look at what kind of leap frogging typically happens is we Leap Frog immediately into Technologies into Production and consumption patterns that are much more energy intensive and much more material intensive right and so the efficiency Improvement and the leap frogging typically don't help but just increase the size of the economy at the expense of everything else which in the long run if you recognize that there

are these fundamental biophysical constraints will really be a problem and then the last point that I make here is about default setting is That our whole system is set up to reward that kind of approach look here I am arguing for a world in which we're mindful to these economic systems and I can tell you my retirement payments are directly tied to the performance of the stock market so in the one hand I'll tell you economic growth is really not what we should be pushing for we really should be pushing for development and qualitative changes

and improvements and so on on the one hand I'll tell you this But I can also admit that when I look at my monthly return on my stock portfolio which pays my retirement in you know 203 or whenever years right that I want growth right so we have the schizophrenic system system set up where we sort of increasingly recognize these constraints and people like myself and many others sort of begin to help shape the policy to move in that direction but the default setting what really provides the reward system is still one that's Arguably know

growth oriented material throughput oriented and ultimately not sustainable right so that's a bit of a challenge if not at a minimum it's sort of a moral challenge that I face um so what does all of this mean what does all of this mean so for everyday sort of policy and and action okay and I have a few quick ways of summarizing sort of the The Grandin sort of theoretical perspectives from thermodynamics and economics and some of these observations Of where they lead us to to Really sort of help think about a different world and hopefully

bring about a different world that's much more sustainable than what we currently have so our first two points are the following and there the the first is actually sort of an equivalent in economics you know going back to freatman we often say there is no free lunch right the physicist or thermodynamic thermodynamic would say hey there's no perpetual motion so we Need to recognize that whatever we do has a consequence and in many cases The Economist would say well on the margin the the cost and the benefits the marginal cost and benefit need to equalize

each other well that's when you just talk about monetary terms ter but in physical terms the cost to the rest of the world is typically larger than the benefit that you generate thinking about it in those terms sort of means that we need to Rethink you know how we do economics how we describe how we Define our economic instruments on a much more fundamental So Physical level uh one implication is that we need to match energy sources to the services that that we want I'll give you one little example that's why pictur is here if

you want to heat a room how do we typically do this I can tell you where I'm from where we need a lot of heating of our rooms in part because the Insulation of the houses and so on is so bad what do we do we put these big power plants in place that take highly concentrated refined materials like oil and gas combust them make Steam and heat out of them Drive turbines ultimately generate electricity which is a highly concentrated movement of electrons basically in your wires to ultimately heat up a wire in a heater

that then moves molecules in the room lets them bounce around it's so Inefficient you start with something extremely organized like a fossil fuel make it more organized like electricity and then all you want to do is heat the room so create a little bit more disorder of the material of the of the molecules in the room so what we actually you need to do is not take the highly concentrated forms of energy to create ultimately something is disorganized as molecules whizzing around in a room but to take low quality Energy like solar power build in

a different way organize the buildings in a different way use lighting use Windows use the way in which you structure not just the building but also the morphology of a city to capture what's out there for free to do what you need to do just just heat up the room right why go through all these stages and again what thermodynamics tells you the more stages you have in the process the more disorder you have to create along The way this on the right hand side here is a much more immediate way of converting the energy

ultimately into a desired service and there are so many other ways in which this happens this is a very simple example but you know the production of pains the design of uh containers uh the labeling of there are so many different ways in the manufacturing sector that can think about how you shave off how you take out intermediate steps to shorten the stages And then through this conserve energy conserve materials become more efficient and then become much more sustainable in the long run I want to go through a little thought experiment coming back to my

my my schematic from earlier so trying to think about economics and thermodynamics how they play hand inand but here's the thought experiment take the the thermodynamic ideal which we all know is not going to happen but these are processes that are infinitly Slowly occurring there is no friction there is no heat transfer across finite temperature boundaries there is no an elastic deformation there is no free expansion all these things that actually make up the real world okay take these all out of the picture assume everything gradually and slowly happens and as that happens the amount

of the the way in which we degrade energy and release energy and materials back into the environment is very careful if you wish Is very slow is very methological and happens all at ambient concentration so all the waste heat is at the ambient temperature all the waste materials get released at the ambient concentrations so you really have no impact on the environment you take them from the ambient State you ultimately return them to the ambient seate totally ideal in that ideal the Economic description of a technology is perfectly adequate prices can tell you everything about

how scare how to allocate the scarce resources inside this box but once you move outside that ideal where you actually have waste products generated at nonambient concentrations then it becomes a little bit more complicated this is then where we need science like physics and biology that's where we need political institutions to help bound what can and Should happen in the United States we have toxic uh release inventories that have to be provided by companies here you probably have something equivalent in Singapore there are constraints from the legal perspective to help make sure we know where

the stuff is coming from and where it is going so a little bit outside that physical idea where we still know what these affluence look like political institutions and markets and science together can still provide Pretty much all the information that we need but then you move a little further from that to the case where the affluence are unknown where we don't know where they go and what they do and increasingly markets have less of a role to play and the traditional institutions the way we've designed them are also having a much harder time to

deal with these issues and it's at that point where we need a whole new approach to bring about sustainability we need Social discourse where no longer the efficiency argument or the physics is basic the physic descriptions you know none of these by themselves can tell you what you need to do what we need is multicriteria decision-making where a lot of these insights are being brought to bear and where Society collectively makes choices and there are lots of beautiful models that have been developed like the Danish consensus model models where people come together And with the

help of experts as communities make these decisions and to do this in an Adaptive way that they say well we don't ever really know today all the things that we need to know for the indefinite future we will learn as we make these decisions and we make these decisions on the basis of multiple criteria and then as we learn we rethink our decisions we reimplement and it becomes very difficult to do this if you think about It the way in which designed our current markets and our current institutions but if we want to become sustainable

sort of in the long term maintain the wealth and the quality of life that we have we need to begin to recognize that many of these effluence have unknown Fates and have to be dealt with in a fundamentally different way and so and last but not least what does this mean so very concrete policy requirements and action so one of Them is that we need to begin to cap what's known as the throughput through the system there's only so much ultimately from a resource side or from a waste assimilation side that the ecosystem can handle

we need to cap it at the sustainable level either we cap the throughput based on the constraints that come from the resource side or the constraints that come from the waste assimilation side whichever is more binding once we have these caps then Within These caps we can auction off to Industry and we do this already in carbon trading markets um all around the world uh sulfur trading markets and so on WE cap and then we begin to trade these quotas among the interested parties and then we don't just allocate these quotas we auction them off

right it's it's a common resource that we're really holding as a society that we now let others use right so we auction them off and the auction Revenue then can be Used to create more Equitable outcomes this is one way to bring back the societal component back into the pricing mechanism that I mentioned earlier and then the trade of these auctions then this is where economics really can play a major role that trade then can lead to efficient outcomes so that's one way to think about it a second very concrete policy implication of all of

this is to create what's known as an ecological tax reform right now a lot of the taxes get Levied on the things that we actually value highly there's income tax so we basically tax labor right we tax accumulation of capital should we why don't we tax more instead of the goods the bads tax resource consumption tax energy depletion tax waste generation and one can show you can shift the tax from the goods to the bads in a way that ultimately your quality of life your tax burden does doesn't change at all but Your quality of

life is expressed in the material wealth that's still left out there and the quality of the environment gets shifted significantly if we move from taxing the goods to taxing the bads and then the uh another is a very important uh implication going back to some of my earlier comments about GDP and here's just a two little graphs you know of an analysis that I've done a few years couple of years ago so GDP tells you something about the quantity of Output that's generated by economy in a given Year all the market values of all the

marketed goods and services right but then if you begin to correct this for all the other things that we really value like income distribution like um crime you know it's sort of a negative really it's not you know if crime goes up more police you know more damages more fixing the damages GDP goes up well it's not really contributing to our wealth right so if you begin to subtract Out all the BS and add into many of the goods for which there is no market value household labor raising your kids at home um having grandparents

at that you know all of these things that are really valuable there's no market price if you begin to Value them and add them into it then the change in the GDP the output compared to actually how well off we are looks very different and so as a matter of fact I didn't label them on purpose but this is for uh Maryland the state I've lived in for for a good 10 years um fairly recently this is the line for the GDP and it continues to go up but then if you correct for all the

bads then the real sort of welfare that's being generated in the state is much lower and you can do this and people have done this at National levels and international levels and you see in many cases especially sort of for Europe uh and North America uh those two curves begin to diverge quite significantly in The 1970s GDP continued until the financial crisis to really take off and around the 1980s in most countries the welfare that we've generated the quality of life actually flattened out so which is actually an indicator that we needed ever more stuff

to move through the system to just keep us in place in terms of quality of life not so good um another important point I want to make is that we need to begin to develop new criteria so there is the efficiency Criteria in economics what we really need is sort of a robustness criteria how well off are we under a wide range of different shocks being put onto the system and not just optimal but how robust are we in the long run right so it's efficiency and redundancy it's uh optimality and robustness these are very

different concepts and what's on the leftand side is what you find in the current economic sinking and policy sinking and what you find in the right Hand side is really what some countries some regions some cities in particular have started to move into especially with some of the new challenges that they face like climate change sea level rise heat waves and on and on and then last but not least we need to begin to reink economics right so far we thought we defined economics as the discipline that deals with the optimal optimal allocation of scarce

resources to meet the needs of humans the resources become Ever scarcer the needs become ever larger and you can begin to think that in a finite World ultimately you face a challenge right and so this ecological economics that builds on the laws of physics that takes into account the social context and then then on the basis of those brings in economics sort of as that sort of set of approaches is a very different one from the one that we currently use um but as I said uh many countries uh many regions many Cities around the

world so beginning to reyn this and with that I do want to stop here I want to thank you for your attention I want to open this to any questions comments and particularly challenges and critiques that you might have thanks [Applause] we have uh we can squeeze in about 20 minutes for Q&A uh so I'll pass the mic around anyone who wants to ask a Question please uh we start with Economist Donald Economist do have a way of dealing environmental impact production processes it's called exality presumably you don't think that approach is why not oh

that's a really good question I'm glad you asked this um so how do you do this as an economist yes you recognize that there are some harms being done that are not mediated through the marketplace and then you begin to internalize them through taxes or Subsidies or you know some other kinds of schemes um in principle there is nothing wrong with this the challenge is and I'll just give you one you know not so small example um about car carbon emissions so we have known since the early 1800s that emission of carbon dioxide into the

atmosphere creates something that we call now the greenhouse effect right so that's been a known chemical And physical process for a long period of time um in the 1970s and ' 80s not just the climate but also the debate about climate change has sort of heated up um and then comes the KY protocol and you know many nations have signed on to this and beginning to try to figure out ways of internalizing this 250 years after the Industrial Revolution where we have begun to heavily input carbon dioxide into the Atmosphere and roughly 200 years or

so after we've recognized that this process is a physical one right and a real one are we beginning to talk about internalization of externalities well after the fact I have no idea how long it'll take take us to actually internalize the externalities right so we are probably still decades if not more away from it who knows what harm has been done so what you what you do this is a long way of saying what you do In economics with the internalization of externalities you start out with an approach that is not mindful of the biophysical

constraints you run into a problem then you wait for a while for the political process to unfold right and then you try to figure out what the price is and then maybe at some point you make the right decision right if you begin at the early stage to describe the production process in a way that recognizes oops there's carbon coming Out at the end right and you begin to trace this right you have a very different approach to this it's not just carbon I mean it's Mercury it's uh I mean you name it right uh

it's all kinds of pollutants all kinds of harms uh that Blindside us in many cases in the economic World they come sort of like a big surprise and then we figure out how the marketplace can handle them and they shouldn't come as a big surprise if you had done the accounting for all the Unwanted byproducts at the beginning right Ruben hin PhD student here at the school I wanted to push you a little bit more on what you're were just saying about the political process I mean if we look at fuel subsidies which all economists

basically agree are a horrible policy it's very difficult for a lot of countries to get rid of them you know from a personal level I've been telling my parents in Suburban Maryland to get rid of their cars for 10 years And they just ignore me so you know what is is Academia should we be doing more to try and figure out the political Solutions instead of just economic theory yeah oh that's actually I think you have two questions here I want to first uh talk a little bit about your parents and their car ownership and

not just your parents I mean in the United States and you're you're blessed here actually with with a very different approach to car car Ownership you might not think of it as a blessing right now costly it's very costly right but it's also very costly in the United States it's just in the case of the United States the costs are borne by society and the benefits are reaped by the by the individual right and here you you you have people who benefit from it also bear the cost right so to come back to Maryland or

you can take almost any part of the United States people are In a real tough bind um you won't find support for public transportation or for an increase in fuel prices you know people would say hey let's let's check up you know the price per gallon per liter of gasoline and then that gives people that's the economic argument that gives people an incentive to switch away from cars into public transportation we can actually take that tax to invest in public transportation well it takes decades to build up a public Transportation Network what you do between

now and then is really by increasing the price you just inflict more pain right and then the political process is such that anyone who goes out and says hey I'm going to inflict more pain on you today so that in 20 years you may be able to take a bus right will not vote for you and right and so we are stuck in the United States with an INF public transportation infrastructure that really resembles Soviet era style Transportation uh not what you would s of as you know the 21st century leading one of the leading

economies of the world but we're stuck in this and so there is no easy solution to this right and it actually the the easy solution there is would be one that requires leadership and that's really hard to find right uh but not to pick on your parents or anyone else in the United States the more interest and and that's what you actually Point towards the more Interesting question really is how to get to this societal consent that something needs to happen if you look and I now I can only speak for the US here that's

sort of where most of my you know half of my life was spent most of my all my economic and sort of policy analysis experience goes toward or much of it um the big action in the US actually on climate and energy and on infrastructure Is actually not at the national level it's actually also not So Much Anymore at the state level it's at the city level that's where you have immediately the benefit you see that your bus system gets better you see that the parking situation gets better you see that the road transportation that

the schools you know all of the immediate benefits are immediately recognized by the people who make the decisions and who make the sacrifices right so who are the real Leaders right now in the United States maybe in the world on environmental policy and on social policy and on Economic Policy it's typically not the countries per se it's the cities it's the Mayors some of the most powerful leaders and some of the most Visionary leaders are found at the city level and this I have to say is one of the great chys of being in Singapore

you got it both in one place right you got the city and you got the nation right what a Wonderful way of showcasing to the world how you can do this how you can have a clean environment how you can high quality of Life how you can have wonderful public transportation and how you can for those who want to and can afford it can have private ownership of cars right but this is where the United States will move in this is where Europe is halfway there already that's where Canada is moving towards that's where at

some point the China and the indas of The world will also move towards I have absolutely no doubt and so if you look at the policy process to bring about change I would look at the city level I wouldn't not not so much look at the national level okay the gentleman here you just ped the mic yes um I'm from the United States originally I'm happy to be living here um I I agree with you City level should be but I just want to say that with 60% Of the states controlled by retrograde Republicans who

with with willness to ignore any issue of the environment I I really put it been pessimistic about pretty much at the state level um yeah so so this so coming back to the United States um yes I I sort of have given up hope to some extent too that anything will happen at the national level uh within the states uh if you look on climate action for example 37 of the 50 states have a Climate action plan and are fairly agressively pursuing those uh some of those even have you know climate adaptation plans uh if

you look at cities over 500 cities in the United States the Mayors have uh uh implemented or beginning to implement climate action plans so it's just one example where cities really are moving very rapidly forward um at the national level this is such a big country with so much diversity with so many conflicting Interests finding a compromise there um is somewhat hopeless I share that perspective with you but you can create the reality in the places where the people live and still more than 50% of the US po more than 60% of the US population

live in cities and so you know you do it that that way I hope you're right and then you know the the rest we refer to already as the as the flyover states right the the part in the Middle where apparently not a lot Happens we might take a collection of questions there are three pH all right who have put their hand please I I'd love to hear from the students Jing she had her hand up first yes please and then make come I want to ask okay um hi I want to ask about e

issues for example we give to hybrid cars we Actually like uh reallocate money from the PO to the rich because only rich people buy cars so what do you think of that could you take s your question um hi I'm a PhD student here and I'm my topic is actually related to dealing with unknown unknown and uncertain and climate change so um when you talk about including uncertainities and unknowns in the production function and in the decisions I was just wondering um what are the challenges in Like developing countries like India where the resources are

and the budgets are constrained to include um unknowns which are not uh or items which you cannot visibly see right now uh into some of your decisions then all you have is you're operating under constraints how do you influence policy Meers to include these factors which you cannot see or even for see in the near [Music] future okay thanks yeah yeah Sure hi Chris I'm a PhD student um you referenced earlier the car tax here the Coe and talking about that in something like the carbon trading scheme can we be confident that these pricing mechanisms

actually reflect uh the true environmental risk for impact premium that we should be assigning to these because it seems like now those are largely governed by the market and by demand um but is there a way to need to be restructured and more accurately Reflect the true impact on the environment in terms of the price all great questions let me just a one more sure bring bring them on bring them on J my question is you mentioned that economists rather than trying to their um thinking f a bit off thinking um their the uh do

you have the same thoughts with economic counting framework so I'm thinking particular some Economist are Now try to move towards a GRE counting framework okay you come to the next round after this okay um on the equity issues I'm very sympathetic to that I see this all the time that we with all good intentions um subsidize uh the use of more efficient uh renewable fuels or more efficient processes uh by uh supporting those who can afford them at the expense of those who don't you gave the example of hybrid Cars uh here um many people

are not not able to afford a car in the first place and so they are basically uh subsidizing those who can um the same holds in Germany which is well known for its very rapid expansion of solar technology so if you're a private homeowner and you put a solar collector on your roof and you generate electricity and you feed it back into the grid you can actually depends on the time of day you can get more more money for that energy that you Put into the grid than when you take money out of the grid

so private home homeowners have a lot of incentives to put solar collectors on their roofs and make money on it right and through this Germany now has become the world leader per capita energy generation from solar this is a country that's north of Toronto basically right so they have pushed this very rapidly but people in cities who don't own their own houses they don't benefit from this right it's The homeowners the apartment owners who benefit so these subsidies happen all throughout and so yes there is a big en environmental or Justice implication of this that

must be looked at very carefully uh there is also a Justice implication of not doing any of these policies right so if you do not support the movement towards more efficient and more renewable fuels uh it's also the households who uh are poor who have a larger share the expenditures go towards Energy so if you don't move away towards renewable fuels uh away from the fossil fuels then you're over the long run increasing the price most likely of the fossil fuels and therefore you increase the drain on the income of the poor as well and

so at the end you would need to weigh those two environmental justice implications against each other and the analysis is far from trivial so I'm very glad to hear you point at that but so there's a Justice implication of the policy action and then there is a Justice implication of non-action and it's really those two that we need to compare not just the action against the status quo um the second question that was about the unknown unknowns uh and the example of India yeah I I fairly quickly admit that what I have said is easier

done in places where you have the infrastructure to Monitor and enforce and account and uh to assess much more Carefully than you might have in rapidly developing or in in under less developed countries around the world especially if you're in rural places it's even more difficult to do so data challenges will always be there but uh data challenges are always there also in the more developed and industrialized nations I think what's more important is to begin at the outset to put in place the mechanisms that can accommodate those insights rather than To use instruments that

will not and by having in place the instruments that accommodate the data even if you don't have the data yet available you put also in place an infrastructure through which you can then begin to collect the data and India you know through its at least its Colonial history going back to that point and if not before has a very long history of good record keeping on a lot of things uh because people have thought this was really useful and it's still Being maintained and so why not at a critical juncture like this begin to put

in place accounting schemes even if the data is not there yet so that when it comes that you can make the better decisions rather than to move ahead with something that we already know is outdated and inadequate for the problems at hand carbon trading schemes do they reflect the environmental impacts no um I was part of putting in place the first and only carbon trading scheme in the United States on power plants um in the eastern part of the United States there are now back then were 11 now uh 10 states uh doing it's called

the regional greenhouse gas initiative of for short Reggie um the carbon price there somewhere around5 to7 per ton uh the European carbon trading system now has somewhere around 10 to4 doll per ton that doesn't even come close many of the climate models that we use and calculate the so-called cost of social cost of Carbon the kinds of models that are being used in the new ipcc report that's being released in just a month and a half or so or two months um all point at typically carbon social cost of carbon uppr of $100 per ton

so uh the current systems are in inadequate and largely driven by the current market dynamics and the current rationale behind those Dynamics many of which you know go back to the shortcomings that I've sort of laid out in my talk so uh we need a Different approach and then with this will no doubt get a very different carbon prices uh but then again there is the argument of political will and uh and power and Leadership to bring this about and how quickly do you bring it about without hurting but um people and the economy but

to do this in a way that we actually have the time to restructure that's the Big Challenge and then uh the reinking um of the accounting uh that was the last question can you just Expand on that a little bit more I just took sort of very basic notes I'm not quite clear what I fully understand what you're trying to get sure so um you got to the point where the models that have created inate them I thinking uhing the way that we account for GP through all the comp oh the green account yeah and

some people are trying to amend add accounting fortical that that should be happen way no I think it's it's definitely a Positive right now you know the GDP is the market value of marketable goods and services lots of stuff is not marketed has no market value doesn't count contributions of ecosystem to the economy don't count right so there's a wetland out there you pull the parking lot put a parking lot on it and you charge fees suddenly it has contribution right previously it made no contribution so what are we going to do no contribution or

contribution well we'll Put the parking lot out there or maybe a shopping mall or whatever it is right and so uh the green accounting the satellite accounts that are used to supplement the GDP absolutely that's one way to go uh more interesting ones are actually the ones where you not just have the GDP account and sort of these satellite accounts that tell you something about the environment tell you something about society and so on but really embed them in each other so like The um it's called isw the the indicator for sustainable economic welfare or

GPI the cross uh the genuine um genuine progress indicator or Bhutan has its happiness Index right there are fundamentally different way of thinking about what it means to develop an economy and I think that's really if you if you forget everything I've said all day right that's the big distinction do we want to grow the economy or do we want to develop growth is a size thing Right it's increasing right it's increasing the throughput of materials it's amassing the stuff that's inside but it does not tell us anything about qualitative changes real development is qualitative

we right now still use GDP as an indicator of development which it is not what we need is through these new accounts that I mentioned GPI iscw or others we need an accounting of the actual quality qualitative change how much better are you off how much better Do you feel how much better is society off to deal with the challenges it faces how much better is the environment off right those are the kinds of questions and then the GDP become I don't want to say it becomes it turns to irrelevance but it's not what it

is right now right and we need these new guides for policym and it's a little bit of an uphill battle because so with my little you know retirement account anecdote in ated we're still really tied to the old model And what we need is a new one and you know this is why it's so important to have these conversations at universities with all these young and bright people in here all of you uh so you know my hope for my retirement lies with you we we'll just manage one last round of question start with Mr

gentleman at the back and then over here thank you thank you uh Professor fantastic presentation uh at the beginning I must say that I was lost Okay but at the end of it the economics uh quick questions um let see where I got it right you mentioned something about the power generator efficiency 3 per month to it has not increased that means along the way nothing actually uh you know increased that and the efficiency of the economy of the US is 2% but incre uh then I saw the pictures of that uh you know the

PowerPoint plant and the Beautiful Bungalow which is yours and Uh what I'm trying to look at is that how does things move uh from the big I'm looking at what you say just now the question is do we want to grow or develop grow means big develop means small I I I look at that pictures and saying whether it is actually something we're looking at big cities or a small town so in Singapore we actually although we are City but we develop it in such a way that the jum iron is at one side residential

and another side The you know during the day everybody to we are now looking at a city in a smaller 5 km we so I just wondering that you know maybe the new economy model that you have trying to share with us does it think in a time of Reinventing Technologies with your new economic models uh thanks very much for that very insightful talk from the environment industry I want to ask about um what your what your presentation would have to say say for international Applications I'll use Singapore as one example we have trans laundry

pollution coming from another country so obviously the costs are born by by one country but the cost are created by another country uh natural resource resource depletion is another example where resources could be produced our natural gas is produced in another country but we just buy the natural gas so um how could we try to improve the international process at a regional level at a bilateral level to Try to take these into account excellent [Music] yeah Doo and my colleague Doo and I have been pitching for having science literacy especially uh entropy and laws of

thermodynamics are the required curriculum for policy students and demonstrated why it is required for policy um my question specifically relates to the issue of energy that you demonstrated ear in presentation um if we were to go back to a hunting and C Lifestyle mus having this conversation right now but the problem is we are right now 7 million counting and even even the most conservative of have a PO 11 so the question is how do we uh solve the problems of energy and food and water for the 10 to 11 million population you have to

rely on energy sources that you suggested would be ideal because uh especially the renewable energy sources That the rate at which theate energy is very low compared to high my as an engineer I can clearly say that the easiest way to solve this problem is to rely on the necessary EV but the problem is they also disate and much faster but your solution is to go back to Renewables but the question is can Renewables solve the question of [Music] meeting great so you want me to solve The World's problems here well I'll try at least

I'll try to make a contribution to this uh let me start uh with the first question about the the The observed lack of efficiency Improvement yes so we have haven't really become ever more efficient uh we have expanded the scope of our operation you make the case that you know Singapore is now reinking the way it sort of internally structures itself Right and I think this is a really interesting observation with regard to the following it's it's a systems perspective not just a technology perspective right so far what we've often done is we observed a

problem we've tried to become more efficient with regard to a particular technology but really at the end these technology get used in a social in a spatial and a geographic context right so if you take a city like like Singapore and the same Holds for many other cities around the world that are now trying to develop more of a neighborhood model to developing then you be then you can begin to develop neighborhood based power generation neighborhood based uh water and energy uh and material recycling you already do new water there are all kinds of new

implications of developing in a different way right and so you can have efficiency improvements at the process level but you can also Have efficiency improvements at the systems level right and those are the efficiency improvements that we haven't really pushed for right because so far the goal was you know trying to harness economies of scale right and and that only gets us to a particular point and now that we have sort of gone down that road and get stuck at you know 43% for a power plant or 2% you know Second Law efficiency for the

US econ now we recognize this is is Only so much we can push this now we step back and take the systems view now we begin to think about spatial organization of these things right and it's a very different way of thinking about the problem and and I know this this is challenging and look let's and that comes back to the last question so snite comment about solving the world's problem well since the Industrial Revolution so we're now talking 250 plus years right now we recognize that we've Sort of boxed ourselves in it's not going

to happen in 5 years or in 10 years that we get out of this but what will need to happen in the next two to 5 years is that we need to put in place the mechanisms that set us up in a different way so that we can become sustainable right and so we are now at a really critical juncture climate change is one wake up call loss of species diversity is another one political frictions and social kinds of challenges Are another one right and on and so there we're like in the economic Global mown

is and so all of these keep coming together and I think we are now at a great place where we can start saying oh let's use all the old ways of doing things that got us to this point to try to solve it or let's try to be mindful of the constraints and think about it in a different way and that's where the real challenge is that's where universities where policy schools like This one have a key role to play to think about alternative worldviews to think about alternative geographies for a city and the technologies

that go with this not just the Technologies by themselves right and the social structure that goes with this and the environmental resources and the waste absorption Capac now we at that place where we can ask and where we need to ask these questions the longer we wait the more difficult it will be right but It's not going to be 2 years or 5 years that we solve the problem but it's going to be 2 to 5 years when we need to implement the new TR so that's one answer um International implications of resource depletion look

this happens for the United States this happens for Europe let me give you the European example because I know this very well the Europeans Pride themselves in having reduced their carbon emissions per capita more or less like they promised In the Kyoto Protocol not well they Pride themselves because they account for the carbon emissions that happen inside the European Union right more and more of the emiss are attributable to processes that are happening production processes that are happening in Malaysia in India in Brazil in China elsewhere in the world and so they're importing materials and

energy that have been processed elsewhere and those carbon emissions are Not accounted so what we currently do is carbon accounting on a production basis not on a consumption basis if we switch this suddenly the Europeans wouldn't look so good right as a matter of fact there's a nice study by Clen Peters that came out last year early last year was published in the National Academy of Science of the National Academy of the proceedings um and um it showed that the emissions uh since the pr Kyoto Protocol was ratified in Europe the emissions of The European

countries roughly went up by about 10% rather than down not so good so if you take the consumption based accounting so a lot of the solutions don't come from the accounting but a lot of the incentives can come when you do the right accounting and so border adjustments so having a high carbon tax internally and then doing the Border adjustments uh so that you reflect you know the internal use of resources and the Damage that you done Out do outside your own economy um would be a first step to do this and there are some

discussions in the World Trade Organization on how one does this it's going to be a big challenge um and then how do you solve the problem of growing human population um we know for F fuels are finite uh placing Our Hope on a finite resources resource to meet the needs of a growing population doesn't strike me as the right approach we have 200 and More years of history of investing heavily in the exploitation in the extraction in the processing and the delivery of fossil fuels nuclear power if it were not subsidized would not be marketable

many of the fossil fuels if they were not heavily subsidized would not be marketable yet we all have an issue subsidizing non-renewables makes no sense so why not take away some of the subsidies from those that we know are on The endangered species list fossil fuels nuclear consumption right and put that money to the ones that we know will be available perpetually solar wind to some extent Hydro geothermal wave energy from the oceans you name it if we begin to transition then by the time and this would be sort of the ultimate sustainability criteria by

the time by which we out of the fossil fuels we have put in place an Infrastructure to provide the energy goods and services and that's the services part that's really important that can compensate for the loss then we're fine right now we're depleting on one side and we're not building up the infrastructure on the other side that's not a long-term viable strategy so there's no way around it sorry to say that didn't mean to end on such a depressing Note but you can also put it the other way around you can say hey there's a

business opportunity you know the other guys are like on their last leg right maybe they have another 5 years or another 10 years or whatever it is the ultimately the ultimate future will lie somewhere else let's go [Music] there unfortunately all good things must come to an end thanks very much Maas no thank you So much appreciate