Review of Murphy's Energy Book

I’ve written a formal review of the new book Energy and Human Ambitions on a Finite Planet by physicist Tom Murphy. You can read the review at its American Journal of Physics home, or find a thoroughly annotated version here.

The book covers much of the same material as Murphy’s Do the Math blog, except that it’s a textbook, written mainly for college students who are not majoring in physical science but are taking a course to satisfy a science breadth requirement.

I was a big fan of Murphy’s blog back in its heyday a decade ago. It was one of my inspirations for eventually starting this blog. Murphy is a first-rate physicist, and his blog is full of great examples of how to think like a physicist about energy.

But as you’ll see if you read my review, my opinion of this textbook is more mixed.

A blog is a great place for trying out ideas and getting feedback on them from whoever might be interested in reading. It’s inherently informal, and readers generally assume that any conclusions might be tentative and/or controversial. Alternative viewpoints are always just a click away.

A textbook is different. Here we’re imparting knowledge and wisdom to the next generation. Students reading the book may be a captive audience, taking the course to satisfy a school requirement. This setting obligates us, I think, to be much more balanced and authoritative.

As I explain in the review, I think Murphy’s book falls short of this standard in several places. But it’s still a major accomplishment, full of food for thought, and I recommend downloading it (it’s free!) and taking a look. Leave a comment below to share your own thoughts on the book.

I’ll have more to say about some particular parts of Murphy’s book (and blog) in later posts.

Comparing Average Income to GDP per Capita

This article has no grand purpose. It just documents some technical stuff that I’ve learned about global economic data.

In the previous article I included a chart comparing a bunch of the world’s richer countries by GDP per capita. But I also described Max Roser’s estimate of the minimum economic growth needed to reduce world poverty to the same level as in Denmark, and that estimate is based on average personal income, not on GDP/capita.

Does it matter whether we compare countries by income or by GDP/capita? If so, which is better?

Fortunately, Our World in Data provides a handy bubble chart that plots average income (or expenditure) per day vs. GDP per capita, country by country. Unfortunately, this chart follows the usual convention of presenting income on a daily basis but GDP on an annual basis, so to understand it you have to keep multiplying and dividing by factors of 365. I’m terrible at doing that in my head, so I had to draw some lines on the chart to show where GDP/capita equals average income, where it’s twice the average income, and where it’s four times the average income:

Isn’t this interesting? In nearly all countries, GDP/capita is larger than average income. In the richest countries the ratio is pretty consistent: a factor of about 2 or 2.5. Elsewhere GDP/capita can exceed average income by a factor of more than 5 (Kazakhstan, Egypt, Nigeria), or, in a few of the poorest countries, not exceed average income at all (Haiti, Comoros, Liberia). For the world as a whole, GDP/capita exceeds average income by a factor of 2.66.

So what’s going on here?

Well, for one thing, there must be uncertainties in the data. My understanding is that the mean income numbers come from statistical surveys of households, which inevitably involve sampling errors and could also have systematic reporting errors. Governments compile GDP data by measuring production and trade and such, but these numbers won’t be exact either. How inaccurate should we expect any particular point on this plot to be? I have no idea, and my impression is that it would take weeks of digging into the data sources to get much of an answer.

Complicating things further, not all the “income” values are actually income. Some of the surveys ask instead about household expenditures.

Yet another complication is that a number of countries (Saudi Arabia, Oman, North Korea, Cambodia, Singapore, Argentina, Venezuela, Cuba, New Zealand, and many smaller ones) are missing from this chart, presumably because there are no good income surveys for those countries.

But the basic fact that GDP per capita is greater than average income (or expenditure) is no mystery. Roser explains it qualitatively:

GDP includes many items that are typically not measured in household income surveys, such as an imputed rental value of owner-occupied housing, the retained earnings of firms and taxes on production such as VAT. The gap is even larger when GDP is compared to surveys of household consumption – the latter concept excluding both investment expenditure and government expenditure on public services such as education and health.

Unfortunately, I don’t have a good feel for which of these factors contribute the most to the GDP/income ratios shown in the chart above.

What I’d really love to know is how these differences translate into people’s actual standards of living. Kazakhstan and Nicaragua apparently have the same average income, even though Kazakhstan’s GDP/capita is 4.5 times Nicaragua’s. Is life in Nicaragua more similar to life in Kazakhstan than it is to life in Nigeria, which has the same GDP/capita as Nicaragua but 4.3 times less average income? How does life in Nigeria compare to life in Mozambique, with the same (low) average income but a GDP/capita that’s less by a factor of 4.7?

Now let’s return to Roser’s estimate of the economic growth needed to reduce world poverty to the same level as in Denmark today. Denmark isn’t labeled on the chart above, but it’s one of the smaller dots just under the A in “Austria”, with a GDP/capita of $46,683 per year and an average income of $55.63 per day. Those numbers are 3.02 times higher and 3.49 times higher, respectively, than for the world as a whole (GDP/capita $15,469 and average income $15.94). Roser effectively uses the Denmark/world income ratio of 3.49, which he multiplies by a world population growth ratio of about 1.46 (roughly the projected world population in the year 2100 divided by the population in 2017 or so) to obtain a needed world economic growth ratio of 5.1.

If we prefer GDP/capita, rather than average income, as our measure of the size of the economy, then the only change we need to make to this calculation is to substitute the Denmark/world GDP/capita ratio, 3.02, for the income ratio of 3.49. Then instead of a needed world economic growth ratio of 5.1, we get 5.1 times 3.02/3.49, or 4.4.

The basic point, of course, is unchanged: The world economy needs to grow substantially if we’re going to lift nearly everyone out of poverty.

Trying to Figure Out "Degrowth"

As a long-time fan of Our World in Data and its director Max Roser, I’ve gradually become aware of the bitter feud between Roser and economic anthropologist Jason Hickel. It’s a classic wizard-vs.-prophet duel (in the language of Charles Mann’s wonderful book), between a wizard of global data and a prophet of the degrowth movement.

Hickel has made a regular practice of attacking Roser’s work. Roser in turn has argued for the necessity of further economic growth. The feud has gotten more personal and acrimonious on Twitter, where each accuses the other of misrepresenting his work. From what I’ve seen, some of those accusations are fair—on both sides.

But what fascinates me is not the recurring spat over over who’s misrepresenting whom, but the question of where exactly Hickel and Roser agree and where exactly they differ on the big global issues. I’m still trying to figure this out, but at the risk of getting some nuances wrong, let me try to summarize.

Roser and Hickel both see global poverty as a huge problem. They agree that we must not only eliminate the most extreme poverty (people living on the equivalent of less than $2/day), but strive to raise everyone’s living standards above a much higher threshold.

Hickel and Roser also agree that we need to reduce global carbon emissions very quickly.

But Roser says that the way to do those things is to keep growing the global economy, while Hickel’s slogan is degrowth. How is it that they can agree on the goals while advocating opposite solutions? I’ve been puzzling over this question for quite a while (admittedly without taking the time to read as much of Hickel’s work as I’ve read of Roser’s).

Now Kelsey Piper has published a good article about the degrowth movement on Vox, quoting both Roser and Hickel. And that article gave me an opportunity to ask a version of my question on Twitter:

Glad to learn that even @jasonhickel says it's ok for poor countries to grow up to a certain level. Has anyone ever pinned him down on where he would set that level?

— Dan Schroeder (@dvs1444) August 3, 2021

Much to my delight, this tweet prompted multiple responses from Roser, Hickel, and Piper, adding up to what I thought was a fruitful conversation. Hickel also posted a longer response, summarizing his position.

In his response Hickel says quite plainly that “degrowth is for rich countries.” But which countries does he consider rich? He likes to divide the world into the “global North” and the “global South”, so perhaps he would equate “rich” with the former, which elsewhere he has defined as “US, European Union, Canada, Australia, New Zealand, Russia, Switzerland, Iceland, Israel, Greenland, Norway, Japan”. One obvious problem is that quite a few Asian Tiger and Persian Gulf states are as rich as these. Even Malaysia is as rich as Russia, while Turkey and several Latin American countries are richer than Bulgaria (which I think is the poorest EU country in terms of GDP/capita).

But let’s assume for the sake of consistency that degrowth is for not just the “global North” but also for most of these equally rich countries, down to some cutoff that’s somewhere below Russia. The real problem is that if “degrowth” implies a worldwide GDP/capita goal any significant amount below the level of Russia, we’re leaving little or no room for growth in big middle-income countries like Iran, Mexico, Brazil, and China. Is that really what Hickel wants? Let’s try to dig deeper.

Hickel actually doesn’t like talking about GDP/capita. He instead reframes the discussion in terms of per-capita energy use. This changes a few details, but it doesn’t change the big picture:

Here Iran is above France, Malaysia is above the UK, and China is right behind Italy. Latin America comes out lower in this ranking than by GDP, but in a warm climate you need less fuel for heating.

The general lesson I draw from this data is that it’s really awkward to try to divide the world’s countries into two groups—rich and poor, or North and South. 

The specific lesson for interpreting “degrowth”, I think, is that it’s not fundamentally about the wealth—or the energy usage—of entire countries.

In our recent Twitter thread, when I pressed him on what “degrowth” means for the world as a whole, Hickel replied, “On an aggregate global level, we need a reduction of resource/energy use, and we know this can be done in a way that’s consistent with high levels of well-being for all.” When Piper then pressed him on where he would set that global level, he pointed to a bottom-up model that first estimates the minimum energy needed to give each person “decent material livings” and then assumes that every single person in the entire world will use exactly that amount of energy and no more. Hickel has cited the same study elsewhere, adding a “generous” 75% energy bonus, but he is still envisioning a world in which virtually all inequality is eliminated—not just between countries, but also within countries.

I think it’s important to do this kind of arithmetic, just as a benchmark for comparison. But is there even a shred of empirical evidence that such a radical reduction in inequality is possible? I very much doubt it.

Roser, by contrast, has described a “minimum growth scenario” that’s much closer to empirical reality. Like Hickel, he imagines completely eliminating all inequality between countries. But unlike Hickel, he assumes that inequality within countries would be reduced only to the same level as in present-day Denmark (a country with low inequality by global standards). Then, if every country’s average per-capita income were to match that of Denmark, only 14% of the world’s people (the same percentage as in Denmark today) would fall below Roser’s poverty threshold of $30 income per person per day (and very few people would be far below this).

How much global economic growth would be needed to achieve Roser’s scenario? Assuming that all this could be accomplished by the year 2100, and taking into account the expected world population growth during that time, Roser calculates 410%. That is, the world economy would have to grow to about five times its present size. (Presumably, thanks to “decoupling”, world energy use would grow by a considerably smaller factor.)

So as far as I can tell, the biggest difference between Hickel and Roser is not their vision of future relationships between countries, or whether they think a certain amount of degrowth is reasonable for the very richest countries, or even whether they wish to decrease inequality within most countries. The difference is that Hickel, unlike Roser, is willing to entertain the notion of eliminating virtually all inequality within every country.

People often call Roser an “optimist”, mostly because he draws so much attention to the progress that humanity has made in the past. Fittingly, therefore, he was quick to point out the irony that it’s Hickel, not he, who is making the more wildly optimistic assumptions about the future:

Then he really has stop his claim that I’m working in the ‘optimism industry’.

That’d be nuts. And it’d be morally wrong in my view to base the vision of how to end poverty on such an optimistic idea of the future.

— Max Roser (@MaxCRoser) August 6, 2021

Many thanks to Roser, Hickel, and Piper for this illuminating conversation!

[Updated 17 Aug 2021 to clarify that Roser’s calculation incorporates population growth between now and 2100.]