Best of the Week
Most Popular
1.US Paving the Way for Massive First Strike on North Korea Nuclear and Missile Infrastructure - Nadeem_Walayat
2.Trump Reset: US War With China, North Korea Nuclear Flashpoint - Video - Nadeem_Walayat
3.Silver Junior Mining Stocks 2017 Q2 Fundamentals - Zeal_LLC
4.Soaring Inflation Plunges UK Economy Into Stagflation, Triggers Government Pay Cap Panic! - Nadeem_Walayat
5.The Bitcoin Blueprint To Your Financial Freedom - Sean Keyes
6.North Korea 'Begging for War', 'Enough is Enough', is a US Nuclear Strike Imminent? - Nadeem_Walayat
7.Bitcoin Hits All-Time High and Smashes Through $5,000 As Gold Shows Continued Strength - Jeff_Berwick
8.2017 is NOT "Just Another Year" for the Stock Market: Here's Why - EWI
9.Gold : The Anatomy of the Bottoming Process - Rambus_Chartology
10.Bitcoin Falls 20% as Mobius and Chinese Regulators Warn - GoldCore
Last 7 days
The Greatest Investing Lesson Learned from the 1987 Stock Market Crash - 20th Oct 17
Stock Market Time to Go All-in. Short, That Is - 19th Oct 17
How Gold Bullion Protects From Conflict And War - 19th Oct 17
Stock Market Super Cycle Wave C May Have Started - 19th Oct 17
Negative Expectations, Will the Stock Market Correct? - 19th Oct 17
Knowing the Factors Affect your Car Insurance Premium - 19th Oct 17
Getting Your Feet Wet In Crypto Currencies - 19th Oct 17
10 Years Ago Today a Stocks Bear Market Started - 19th Oct 17
1987 Stock Market Crash 30th Anniversary Greatest Investing Lesson Learned - 19th Oct 17
Virgin Media Broadband Down, Catastrophic UK Wide Failure! - 19th Oct 17
The Passive Investing Bubble May Trigger A Massive Exodus from Stocks - 18th Oct 17
Gold Is In A Dangerous Spot - 18th Oct 17
History Says Global Debt Levels Will Lead to Another Crisis - 18th Oct 17
Deflation Basics Series: The Quantity Theory of Money - 18th Oct 17
Attractive European Countries for Foreign Investors - 18th Oct 17
Financial Transcription Services – What investors should know about them - 18th Oct 17
Brexit UK Vulnerable As Gold Bar Exports Distort UK Trade Figures - 18th Oct 17
Surge in UK Race Hate Crimes, Micro-Racism, Sheffield, Millhouses Park, Black on Asian - 18th Oct 17
Comfortably Numb: Surviving the Assault on Silver - 17th Oct 17
Are Amey Street Tree Felling's Devaluing Sheffield House Prices? - 17th Oct 17
12 Real-Life Techniques That Will Make You a Better Trader Now - 17th Oct 17
Warren Buffett Predicting Dow One Million - Being Bold Or Overly Cautious? - 17th Oct 17
Globalization is Poverty - 17th Oct 17
Boomers Are Not Saving Enough for Retirement, Neither Is the Government - 16th Oct 17
Stock Market Trading Dow Theory - 16th Oct 17
Stocks Slightly Higher as They Set New Record Highs - 16th Oct 17
Why is Big Data is so Important for Casino Player Acquisition and Retention - 16th Oct 17
How Investors Can Play The Bitcoin Boom - 16th Oct 17
Who Will Be the Next Fed Chief - And Why It Matters  - 16th Oct 17
Stock Market Only Minor Top Ahead - 16th Oct 17
Precious Metals Sector is on Major Buy Signal - 16th Oct 17
Really Bad Ideas - The Fed Should Have And Defend An Inflation Target - 16th Oct 17
The Bullish Chartology for Gold - 15th Oct 17
Wikileaks Mocking US Government Over Bitcoin Shows Why There Is No Stopping Bitcoin - 15th Oct 17
How to Wipe Out Puerto Rico's Debt Without Hurting Bondholders - 15th Oct 17
Gold And Silver – Think Prices Are Manipulated? Look In The Mirror! - 15th Oct 17
Q4 Pivot View for Stocks and Gold - 14th Oct 17
Gold Mining Stocks Q3’17 Preview - 14th Oct 17
U.S. Mint Gold Coin Sales and VIX Point To Increased Market Volatility and Higher Gold - 14th Oct 17
Yuan and Gold - 14th Oct 17
Tips for Avoiding a Debt Meltdown - 14th Oct 17
Bitcoin Hits New All-Time High Above $5,000 As Lagarde Concedes Defeat and Jamie Demon Shuts Up - 13th Oct 17
Golden Age for GOLD, Dark Age for the Stock Market - 13th Oct 17
The Struggle for Bolivia Is About to Begin - 13th Oct 17
3 Reasons to Take Your Invoicing Process Mobile - 13th Oct 17
What Happens When Amey Fells All of a Streets Trees (Sheffield Tree Fellings) - Video - 13th Oct 17
Stock Market Charts Show Smart Money And Dumb Money Are Moving In Opposite Directions—Here’s Why - 12th Oct 17
Your Pension Is a Lie: There’s $210 Trillion of Liabilities Our Government Can’t Fulfill - 12th Oct 17
Two Highly Recommended Books from Bob Prechter - 12th Oct 17

Market Oracle FREE Newsletter

3 Videos + 8 Charts = Opportunities You Need to See - Free

Economic Growth Theory: Re-Evolution And The Steady State Of M. King Hubbert

InvestorEducation / Global Financial System Jun 14, 2007 - 08:56 AM GMT

By: Christopher_Quigley

InvestorEducation Integrity, intellectual honesty, courage, focus, foresight, leadership, belief in the goodness of the American people. These are descriptions that spring to mind when thinking of M. King Hubbert. He was a visionary who believed in the power of ideas and the need to use intellectual rigour to analyse and manage change. As a research geophysicist he understood the problems posed by the reality of peak oil and the cultural catastrophe that lay before humanity unless it realised the non-recurring historical nature of the growth phenomenon.


In his presentation to the House of Representatives National Energy Conservation Policy Act Hearings in 1974, he acknowledged the problems of inflation, growth and monetization, but he understood their causes like no other. The fact that these same problems still exist today, to a greater degree 34 years later, shows the lack of effectiveness and understanding in World organizations. These general problems are too important to be left to institutions alone. Everybody counts. To solve current financial crises we must have a fundamental understanding of their makeup.

I think Mr. Hubbert provided posterity a great service in spelling out some of the core problems clearly and perhaps they can help us form the framework for a debate, creating a new paradigm of human comprehension, based on intellectual integrity and excellence rather than fraud and exploitation.

All the words that follow are a synthesis of direct quotes by Mr. Hubbert:

"Without further elaboration, it is demonstrable that the exponential phase of the industrial growth which has dominated human activity during the last couple of centuries is drawing to a close. It is physically and biologically impossible for any material and energy component to follow exponential growth for more than a few tens of doublings, and most of those possible doublings have already occurred....It is inevitable that with the slowing down in the rates of physical growth cultural adjustment must be made....

It appears that the stage is now set for a critical examination of this problem, and that out of such enquiries, if a catastrophic solution can be avoided, there can hardly fail to emerge what the historian of science, Thomas S. Kuhn, called a major scientific and intellectual revolution....

A non-catastrophic solution is impossible unless society is made stable."

M. King Hubbert. 1981
"Two Intellectual Systems: Matter-energy and the Monetary Culture":

"The World's present industrial civilization is handicapped by the co-existence of two universal, overlapping, and incompatible intellectual systems: the accumulated knowledge of the last four centuries of the properties and interrelationships of matter and energy ; and the associated monetary culture which has evolved from folkways of prehistoric origin.

The first of these two systems has been responsible for the spectacular rise, principally during the last two centuries, of the present industrial system and is essential for its continuance. The second (monetary culture), an inheritance from the pre-scientific past, operates by rules of its own having little in common with those of the matter-energy system. Nevertheless, the monetary system, by means of a loose coupling, exercises a general control over the matter-energy system upon which it is super-imposed.

Despite their inherent incompatibilities, these two systems during the last two centuries have had one fundamental characteristic in common, namely exponential growth , which has made a reasonable stable co-existence possible. But, for various reasons , it is impossible for the matter-energy system to sustain exponential growth for more than a few tens of doublings, and this phase is almost now over. The monetary system has no such constraints, and, according to one of its fundamental rules, it must continue to grow by compound interest. This disparity between a monetary system which continues to grow exponentially and a physical system which is unable to do so leads to an increase, with time, in the ratio of money to the out-put of the physical system. THIS MANIFESTS ITSELF AS PRICE INFLATION. It appears that the stage is now set for a critical examination of this problem, and that out of such enquiries, if a catastrophic solution can be avoided, there can hardly fail to emerge what the historian of science, Thomas S. Kuhn, has called a major scientific and intellectual revolution.

I was in New York in the 30's. I had a box seat at the depression. I can assure you it was a very educational experience. We shut down the country because of monetary reasons. We had manpower and abundant raw materials. Yet we shut the country down. We are doing the same kind of thing now but with a different material outlook. We are not in the position we were in 1929-30 with regard to the future. Then the physical system was ready to roll. This time it is not. We are in a crisis in the evolution of human society . It's unique to both human and geological history. It has never happened before and it can't possibly happen again. You can only use oil once. You can only use metals once. Soon all the oil is going to be burned and all the metals mined and scattered. That is obviously a scenario of catastrophe but we have the technology. All we have to do is completely overhaul our culture and find an alternative to money. We are not starting from zero. We have an enormous amount of existing technical knowledge. It's just a matter of putting it all together. We still have great flexibility but our maneuverability will diminish with time. A NON-CATASTROPHIC SOLUTION IS IMPOSSIBLE UNLESS SOCIETY IS MADE STABLE. This means abandoning two axioms of our own culture the (current) work ethic and the idea that growth is the normal state of life . Our window of opportunity is slowly closing, at the same time, it probably requires a spiral of adversity. In other words things have to get a lot worse before they can get better. The most important thing is to get a clear picture of the situation we're in and the outlook for the future.

M. King Hubbert, 1974
"On The Nature Of Growth"

Submission to the House of Representatives
National Energy Conservation Policy Act Hearings

"Two terms applicable to an evolving system are of fundamental importance. These are steady state and transient state .

A system is said to be in a steady state when its various components either do not change with time, or else vary cyclically with the repetitive cycles not changing with time (i.e. the seasons). A system in a transient state is one whose various components are undergoing non-cyclical changes in magnitude, either increase or decrease.

Transition From Steady State To Transient State Due To Fossil Fuels:

By about 2 million years ago biological evolution had advanced to where the ancestors of the present human species had begun to walk upright and to use crude stone tools. At that stage this species must have existed as a member of an ecological complex and competed with other members of the complex for a share of the local solar energy essential for its existence. The energy utilizable was almost exclusively the food supply derived by the biological system from solar energy by the mechanism of photosynthesis. During the subsequent million or more years the human species progressively devised means of capturing an ever-larger supply of the available energy. In view of the slowness with which these developments must have occurred, the whole ecological system of which the human species was a member can only be regarded as comprising a slowly changing ecological steady state .

Although the pace quickened about 8,000 to 10,000 years ago, with the domestication of plants and animals, a rapidly changing transient state of evolution was not possible until the large supplies of energy stored in fossil fuels began to be utilized-when the mining of coal as a continuous enterprise was begun near Newcastle in Northeast England about 9 centuries ago. This was followed as recently as 1857 in Romania and in 1859 in the United States by the exploitation of the second major source of fossil-fuel energy, petroleum.

What is most particular about the history of coal production is the large contrast between the magnitudes of the rate of coal production following the year 1800 and that, which must have prevailed during the preceding 7 centuries. From earlier statistics it can be estimated that the cumulative coal production during the eight hundred years before 1860 amounted altogether to only about 7 billion metric tons, whereas 133 billion metric tons, or 19 times as much coal, was mined during the 110-year period from 1860 to 1970.

Constraints On Growth:

In addition to supplies of energy, other constraints operate to modify growth. These constraints may be broadly classified as being ecological in nature. For more than a century it has been known in biology that if any biological species from microbes to elephants is given a favourable environment, its population will begin to increase at an exponential rate. However, it was also soon established that such a growth rate cannot long continue before retarding influences set in. In our earlier review of the rates of production of the fossil fuels it was observed that for close to a century in each case the production increased exponentially with doubling periods within the range of 8 to 16 years.

The present world population (1974) is about 4 billion, which is increasing at a rate of about 2 per cent per year, with a doubling period of about 35 years. What could have been the minimum average doubling period during the last million years? This minimum would occur if we make a wholly un-realistic assumption, namely that the population a million years ago was the biological minimum of 2. How many doublings of this original couple would be required to reach the World's present 4 billion? Slightly less than 31. Hence, the maximum number of times the population could have doubled during the last million years would have been 31 with the average period of doubling being 32,000 years. Consequently when we compute a maximum average growth rate between the finite levels of population at a time interval of a million years, we arrive at the same conclusion, NAMELY THAT THE NORMAL STATE, THE STATE THAT PERSISTS MOST OF THE TIME, IS ONE OF AN APPROXIMATE STEADY STATE. The abnormal state of an ecological system is a rapidly changing transient or disturbed state.

To obtain an idea of how long a disturbed or transient state can persist a fundamental question that may be asked is: about how many doublings of any biological or industrial component can the earth itself tolerate? A clue to this may be obtained if we consider the problem of the grains of wheat and the chessboard. According to an ancient story from India, a king wished to reward one of his subjects for some meritorious deed. The man replied that his needs were few and he would be satisfied to receive a bit of corn. If one grain were placed on the first square of a chess board, two on the second, four on the third, and the number of grains were doubled for each successive square, he would be content to receive that amount of grain. The king ordered the board to be brought in and the grain counted out. To his consternation he found that there was not enough wheat in the kingdom . i.e. 2 to the power of 64, this amount of wheat, it turned out would be 2000 times the World's present annual wheat crop. This may appear to be a trivial problem; its implications are actually profound. The Earth itself cannot tolerate the doubling of one grain of wheat 64 times. The same principles and the same kind of constraints apply when we are dealing with successive doublings of any other biological or industrial component. Even if there are no shortages of energy or of materials the Earth will not tolerate more than a few tens of doublings

Cultural Aspects Of The Growth Problem:

WITHOUT FURTHER ELABORATION, IT IS DEMONSTRABLE THAT THE EXPONENTIAL PHASE OF THE INDUSTRIAL GROWTH WHICH HAS DOMINATED HUMAN ACTIVITY DURING THE LAST COUPLE OF CENTURIES IS DRAWING TO A CLOSE . It is physically and biologically impossible for any material and energy component to follow exponential growth for more than a few tens of doublings, and most of those possible doublings have already occurred. Yet, during the last two centuries of unbroken industrial growth we have evolved WHAT AMOUNTS TO AN EXPONENTIAL GROWTH CULTURE. Our institutions, our legal system, our financial system, and our most cherished folkways and beliefs are all based upon the premise of continuous growth. Since physical and biological constraints make it impossible to continue such rates of growth indefinitely, it is inevitable that with the slowing down in the rates of physical growth CULTURAL ADJUSTMENTS MUST BE MADE."

References:
Two Intellectual Systems: Matter-energy and the Monetary Culture. M. King Hubbert 1988
On The Nature of Growth: Hearing on the National Energy Conservation Policy Act. M. King Hubbert 1974

By Christopher M. Quigley
http://www.wealthbuilder.ie

Mr. Quigley is 46 years of age and holds a Batchelor Degree in Management from Trinity College/College of Commerce, Dublin and is a graduate of the Marketing Institute of Ireland. He commenced investing in the Stock Market in San Francisco, California where he lived for 6 years. Now based in Dublin, Mr. Quigley actively trades utilising the principles set out in the modules above. This Wealthbuilder course has been developed over the last 9 years as a result of research, study, experience and successful application.

Christopher M. Quigley Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife