The Economic Growth Engine
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The Economic Growth Engine

How Energy and Work Drive Material Prosperity

Robert U. Ayres and Benjamin Warr

The historic link between output (GDP) growth and employment has weakened. Since there is no quantitively verifiable economic theory to explain past growth, this unique book explores the fundamental relationship between thermodynamics (physical work) and economics.
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Chapter 3: Industrial Metabolism: Mass/Energy Flows

Robert U. Ayres and Benjamin Warr


3. 3.1 Industrial metabolism: mass/energy flows INTRODUCTION For practical purposes it is fair to say that wealth, which underlies welfare, is based on stocks of material goods (including land).1 From an economic perspective, welfare is a consequence of consumption, which is essentially that part of economic activity that is not productive of more wealth or simply destructive (such as warfare). The productive component of wealth is known as (industrial) capital, whereas the consumption-related part, consisting of residential housing and durable consumer goods, is not usually counted as part of capital stock, even though some have argued that it should be so counted. What matters for this chapter is that both production and consumption require flows of material goods, as well as energy (or at least energy carriers) such as fuels and electricity. These flows can be characterized as industrial metabolism. Technology (or knowledge) is not an element of wealth per se except to the extent that it can be protected and exchanged. Technology may be productive and therefore worth investing in, either for purposes of increasing skills and ‘know-how’ or – as R&D – in order to promote discovery, invention and innovation. But the knowledge base of an individual, or a firm, is rarely transferable or usable by others, except by means of a cooperative effort of teaching and learning. Hence it is not a component of wealth. On the other hand, material goods that are either portable or transferable to different owners by exchange of title are...

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