new products | book review
By Charles A. S. Hall and
Kent A. Klitgaard: Energy
and the Wealth of Nations —
Springer, 2011. 421
pages, $99. ISBN:
This book on economics is quite readable, addressing many difficulties that the energy world (including renewable energy) faces — not because current energy sources are highly subsidized, but because much of the current “social science of economics” is
wrong and harmful.
Long-established energy sources are in fact heavily subsidized, and we need not be quiet
about that. The most grotesque subsidy for the oil industry has been what even Alan green-span publicly said is a U.S. oil war in Iraq. That war, started by tricking the U.S. population with
arguments known to be false, cost 4,500 dead U.S. soldiers and roughly $750 million, and in
the long run is expected to cost more than triple that. The material and human destruction in
Iraq has been staggering. The United States has taken control of Iraq’s oil, and to help stay in
control, has built a fortified embassy complex in Baghdad covering more than 100 acres and
costing about $1 billion. Meanwhile, U. S. renewable energy budgets are insignificant, and it
is weird that some people still get angry when we ask for a level playing field.
This book is about the economic facts of life, in renewable energy and in the rest of the
energy world. The facts presented are quite revealing, and reading the book is a must if you
want to understand the past, current and future problems in energy.
The early chapters show that energy has had an enormous impact on the course of history.
When energy has been very cheap and abundant, as it has been during the fossil fuel era, it
has allowed great increases in productivity, in living standards, in technology, in the arts, in
territorial conquest and genocide, in health, in life expectancy, and, most ominously, in population. The book documents the fact that a number of the philosophies in the social science of
economics, like capitalism, communism, socialism, mercantilism, neoliberalism, monetarism,
neoclassical economics, Keynesian economics and so on, consider energy to be a commodity
like any other, and are blind to the reality that cheap and widely used energy has a huge impact
on humanity. Economic philosophies often seem based mostly on beliefs or on dogma, with
inconsistent or even contradictory conclusions within any given belief system.
The central chapters of the book focus on the idiosyncrasies of economics, which might
seem comical if they were not also harmful. Unhappily, we have allowed lobbyists, most of
them followers of free-market economists, to write many laws and tax codes. To most economists, fossil fuel and all the other natural resources have been considered unlimited and free
for the taking. Their only posited value is the cost of “production,” that is, of extraction and
distribution. When the price goes up the “invisible hand,” helped by “the law of supply and
demand,” is somehow supposed to provide more of the resource, ready to be “produced”
whenever we feel like it.
According to mainstream economists, it is often better to “produce” resources now
rather than later, since money in the bank earns interest. But resources in the ground or in
the ocean are different. Economists believe that because they just sit there doing nothing,
one should discount their value in the future (and hence their importance to our children).
Among economists there seems to be little interest in the externalities of the use of energy.
Pollution, environmental destruction, global warming, resource depletion and species extinction are often considered unavoidable side effects that can be ignored. Many economists
live in an Alice-in- Wonderland world, in which consumers are rational creatures who always
seek and make the best deals.
The book proposes changes in economic theory to account for the real world, recognizing
the value of nature and the limitations of its resources. The goal is to make the social science
of economics helpful for leaving a livable world to our descendants, instead of leaving them
a depleted, polluted, overheated and overpopulated garbage dump. This is a critical issue
now, because we are already past the Hubbert Peak of worldwide petroleum production,
with oil supplies shrinking steadily. And rational people can no longer ignore the threats of
The authors, a professor of biology and a professor of economics, developed the book
through years of teaching, and concluded that the Emperor of Economics has no clothes.
Many will disagree, with the result that interesting times lie ahead. If you want to be involved
with the future, read the book.
While working at the Jet Pro-
pulsion Laboratory, Frank de
Winter helped to design the
electric power systems for the
Voyager and Mariner 10 plan-
He later founded Altas Corp.,
where he engineered a wide
variety of thermal-transfer
devices for solar water-heating
applications. De Winter has
served several terms as chair
of the American Solar Ener-
gy Society and has chaired
numerous technical confer-
ences around the world. He
holds bachelor’s and master’s
degrees in mechanical engi-
neering from MIT.
FRANCIS DE WINTER
38 March/April 2012 SOLAR TODAY solartoday.org
Copyright © 2012 by the American Solar Energy Society Inc. All rights reserved.