Energy, Wealth Inequality and the Constructal Law

Environmentalists are becoming increasingly aware that efforts to increase efficiency actually cause overall energy use to rise. This was first observed by Stanley Jevon during the expansion of coal use in England in the 1860s. Making steam engines more efficient seemed intuitively obvious as a way to conserve the finite resource of coal. However, the more efficient they became, the faster the demand for coal accelerated and total energy use rose. Jevon wrote a book about this in 1865 and it became known as Jevon’s Paradox, or in current usage, the “rebound effect.”

In this article I show that the Jevon Paradox is in fact a natural result of a healthy economy and the rise of energy-using consumer products. Second, cell phones and the Internet are essential wealth-creating personal technologies dependent on increasing supplies of energy.  Third, that attempts to artificially restrict access to energy disproportionately damage the less wealthy, suppressing their ability to generate wealth and increasing wealth inequality.

Today we know more than Jevon about the demographics of the markets and the products that drive demand. We also need to bring the terminology up to date. First, efficiency is a proxy for price. Second, ultimate energy demand is driven by demand for end products, not by manufacturers. Just because steam engines became more efficient did not mean companies used more coal just because it was cheaper – customer demand is the throttle on industrial output.

In the 1860s, the products being sold to consumers were primarily artifacts, which did not require additional energy to use – pots and pans, buggy whips, furniture and such. The Franklin Stove and its brothers was probably the major energy-using appliance in most households. Increased steam engine efficiency might have lowered the price of those stoves, increasing their market penetration and leading to increased coal demand as people switched from wood to coal, leading to Jevon’s Paradox – the overall demand for coal grew. For energy-using products, the cost of the original product is fixed, unlike the ongoing costs of energy to power it.

The most obvious example of Jevon’s Paradox today is the sales of light trucks and SUVs in the United States. As the charts show, the falling price of gasoline (proxy for efficiency) is correlated with an increase in sales of larger, less efficient SUVs, increasing overall fuel consumption. The number of cars also determines the number of services needed to keep them running – insurance, licensing, repairs, accidents, roads, parking lots, etc. A wealthy person might buy a more expensive car, but they don’t drive substantially more than the less wealthy or buy more tires, or have more accidents. In the end, the total ecosystem cost for the automobile fleet and the energy it uses is more dependent on the number of cars, not their specific characteristics.

When you buy an energy-using product, it continues to use energy throughout its lifetime. As the market penetration of these products rises, the aggregate energy consumption is added to the total energy usage of the society. Refrigerators, toasters, microwaves, washers and dryers all add to the cumulative energy demand. Increasingly, we now have information products, which come with massively increasing energy-use profiles.

Cell phones are the poster child for energy usage in the information age. If cell phones cost $3,000 each, the market for them would probably be limited to the wealthy elites. However, as the price drops, cell phones begin to penetrate the less-wealthy markets, with large increases in the number of phones. Today, phones range from $1000 iPhones to $20 burners, or even less for castoffs. Anyone who wants a phone can have one, even in third world countries. The falling price of the phones is driven by efficiencies in volume and design. However, the infrastructure costs of the phone ecosystem are relatively constant per user. Cell towers, networks, data centers, billing systems, even sales and marketing are driven by the raw number of phones out there. Users pay for minutes to keep the system operating and making profit. Overall energy consumption increases more or less directly with the number of phones in service. Obviously Internet access is an additional extension of that system.

These charts show the population of the U.S. (Green) plotted against wealth (approximate – the top 5% is truncated so the chart will fit on a page at the scale shown). The red line shows a hypothetical declining product price curve. It can be viewed as the maximum price at any point along the line were a person at that wealth level would buy the product. The blue line represents gross market penetration – how many people out of the entire population own the product. The curve shown is hypothetical and will be different for every product and price profile. At first, wealthy people (and early adopters) buy without concern for price, but there are relatively few of them, so market share grows slowly. As price decreases, it reaches the steeply rising part of the adoption curve. Sales grow rapidly. At the tail of the curve, the very poor eventually come on board as the price drops to a manageable level. This curve is a variation of the well known early-adopter, middle-adopter, late-adopter bell curve taught to marketing students.

In the middle part of the curve, the steep part, adoption rate exceeds rate of price decreases. In the early days of the steam revolution, this is no doubt what Jevon observed that caused his concern. It is not actually a paradox, it is the natural functioning of a healthy economy driven by energy-using products. Jevon’s solution, like environmental alarmists today, was to ration, or artificially inflate the price of energy to try and slow the overall energy growth. In this scenario, increased efficiency is a negative, as it only stimulates additional demand. Then as now, the only way to implement this as policy is to put a cap on production or tax on the price of coal to try and halt demand growth. The second chart demonstrates that resulting higher prices are devastating to the poorest end of the wealth curve, effectively depriving them of  access to products and services enjoyed by the wealthier segments and which the marketplace is ready and willing to provide – especially information products that are essential for effective functioning and wealth creation in modern society.

In his far-reaching book, The Physics of Life, Professor Adrian Bejan shows how the Constructal Law of physics affects and in a sense “directs” every aspect of the universe, from the formation of stars to the evolution of artificial intelligence. The Constructal Law was formulated in 1996 by Professor Bejan, an eminent expert in thermodynamics at Duke University, whose work is among the most highly referenced by other scientists. To simplify slightly, it states that any energetic flow, whether water in a river, blood in your veins or information on the internet, must, if it is to evolve (live), morph its channel to increase access to its own flows. Unless they are constrained, energetic flows only (and always) increase. This is the principle that drives the evolution of all life forms, animals and trees, you and me. In our personal lives we value success, wealth and access to more powerful machines precisely because these things amplify the amount of energy that we can command, thereby enabling us to create yet more wealth and access more energy.

All life forms use small amounts of energy to harness larger amounts – energy amplification. A tree uses the energy it has to grow and thus have access to more sun and CO2. When you get into a car and press the accelerator, that tiny amount of energy (and your intelligent control), amplifies your biological energy to propel you across the landscape hundreds of times further and faster than you could accomplish on foot. Scientific researchers use energy to produce results which don’t look energetic, like E=MC2. However, those results allow others to amplify that small information-energy to build power plants that extract vast quantities of nuclear power at very low cost.

A new paper by Adrian Bejan and Marcelo Errera, Wealth Inequality: The Physics Basis, highlights the relationship between energy use and wealth among all the countries of the world. The growth in wealth of every country follows a straight line with their increasing use of energy, measured both against total GDP and GDP per capita. They prove that the wealth inequalities we observe in every country are inherent, created by the physics of energy flows and the complexity of the society.

Additionally, Bejan and Erera show that although wealth inequality is a natural consequence of the physics of energy and movement in a heterogeneous population. Then, to quote: “design change that facilitates global flow [money, energy] is adopted and persists. It survives. … The evolution of money was a dramatic change for facilitating the flow of traded goods, a huge change relative to trading in nature.” In the same way, the Internet has led to increased flows of information, vastly increasing our access  to information that we can integrate into our knowledge, multiplying our ability to harvest energy to increase our own wealth.

 Information services are the shortest route to increasing our personal wealth. Unlike material wealth, even the poorest among us can potentially have access to the information wealth provided by cell phones, the Internet and the many services it provides.On the San Blas islands, in the Caribbean off of Panama, the indigenous Guna people  have chosen to remain independent as their own nation. They live on low sand islands which only support coconut trees and they fish for sustenance. They have no electricity, running water, glass windows, doors or floors in their houses. The one thing that every one of the Guna has immediate access to is a cell phone. Somewhere in each island “village” is a solar panel connected to a car battery, the recharging station. The Guna use their phones for personal communications, but more important, to get word from the mainland when it’s time to hop in the boat and pick up a load of tourists from the mainland. Wealth created by information.

With rapidly dropping prices, vast swaths of the global population are moving directly to smartphones, tapping the power of the Internet  and increasing their personal wealth. Streaming movies and music AI, cloud storage, Facebook, Instagram and Whatsapp among thousands of other services, are driving massive increases in information demand worldwide.  The forward-looking energy demand from this sector is far beyond what simple efficiency gains are going to provide. Already, massive data centers are being sited adjacent to large hydroelectric dams to take advantage of their relatively cheap and dependable power. By some estimates, tens of thousands of data centers around the world, holding hundreds of millions of servers, are consuming around 10% of all the energy generated globally. As our global brain develops, we need to be planning for more energy growth in the future, not less.

I am making the argument that providing more energy to more people everywhere on the planet is the only way to continue the evolution of the human race and lift its people above subsistence to build wealth of their own. We have to recognize that the demand for inexpensive energy will grow as we do this and that is a good thing. No amount of “efficiency” or regressive attempts to restrict energy supplies will provide resources for the future. One thing is for sure – the more energy we have available to us, the faster we will evolve as a species, the wealthier we will all be and the more energy we will need. The flowing, evolving progress of the human race demands it.

6 thoughts on “Energy, Wealth Inequality and the Constructal Law”

  1. There are major differences in transport energy consumption between cities; an average U.S. urban dweller uses 24 times more energy annually for private transport than a Chinese urban resident, and almost four times as much as a European urban dweller. These differences cannot be explained by wealth alone but are closely linked to the rates of walking, cycling, and public transport use and to enduring features of the city including urban density and urban design.

    1. You seem to be good at statistics – maybe you could tell us the percentage of personal income used for communication and information services in each of those countries or areas and the price of electricity. That would actually be relevant to the article.

  2. Hey There. I found your blog using msn. This is an extremely well written article. I will make sure to bookmark it and come back to read more of your useful info. Thanks for the post. I will certainly comeback.

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