Engineering in an Age of Limits

Discusses the role of engineers as society enters an Age of Limits — particularly with oil supplies.

16. Greek Gifts

Engineering in an Age of Limits

Post #16. Greek Gifts

Trojan Horse
Engineers did not invent the steam engine — the steam engine invented them.
What will a post-oil society invent?

This is the sixteenth post in the series “Engineering in an Age of Limits”. We are facing limits in natural resources, particularly oil; our finances (money seems to be increasingly disconnected from actual goods and services); and the environment as we continue to dump waste products into the air, the sea and on to land.

We are also facing a transition as the Oil Age comes to an end. This is not the first time that society has faced such a shift. At the beginning of the 18th century the principal source of energy in northern Europe was wood. However the forests were mostly depleted so a new source of energy, coal, had to be developed and exploited. The extraction of coal from underground mines posed new technical challenges particularly with regard to removing the water that flooded those mines. So new technologies, particularly the steam engine, had to be developed. Necessity was indeed the mother of invention. These technological developments led to many changes in society, including the creation of the profession of engineering. The transitions that we are currently experiencing as we look for alternatives to oil are likely to generate equally profound paradigm shifts.

In this blog we consider two questions:

  1. What new paradigms, new ways of looking at the world, will develop, analogous to the development of engineering in the early 18th century; and
  2. How can engineers and other technical professionals help navigate the troubled waters that we are entering?

These posts are published at our Welcome page. We also have a LinkedIn forum that you are welcome to join. For a complete list of posts to do with the Age of Limits please visit our . Thank you.

Unpayable Debt

Greek-Flag-1
Much of the news of late has been to do with the the financial crisis in Greece. There are many theories and explanations as to the causes of this crisis. Most of these theories look at economic and financial issues such as over-generous pension programs, a failure to collect taxes from the wealthy citizens, the flight of savings to other countries and the strait-jacket effect of a single currency among different economies. But, as we think about the Age of Limits and its impact on the engineering professions, there are at least two deeper lessons that we can derive from the suffering and confusion that we witness in today’s Greece. Indeed, the proverb “Beware of Greeks bearing Gifts” comes to mind (the phrase derives from Virgil’s story of the Trojan Horse.) What is going on in Greece now may provide guidance to engineers as they navigate the upcoming Age of Limits.

A fundamental theme of this series of posts is that our society is running into physical limits in all areas: resources, environmental and financial. And this seems to be what is going on in Greece — a nation that has accumulated enormous debts but one that has very little in the way of natural or industrial resources. Normally these debts would be paid off, or at least deferred, through growth in the economy. But if physical economic growth has not only stopped and is unlikely to return then the problems cannot be solved by taking on more debt because there is no way that the new interest payments can be made. Supporting this point of view, Gail Tverberg suggests that the European countries with the greatest economic problems (Cyprus, Greece, Portugal, Italy, Spain and Ireland) along with Puerto Rico in the western hemisphere all have the greatest percentage of their energy supplied by oil.

If this were just a Greek problem then we could probably find some way of finessing it. But most other nations have also taken on enormous debt burdens yet few of them are likely to see much physical growth any more. Hence the confusion and hardship that we are seeing now in Greece is likely to repeat itself in those other nations in years to come. Government and financial leaders will try to solve these problems with financial tools of one sort or another — not realizing that none of their actions are likely to make much difference, except to pile on ever-greater burdens of unpayable interest payments associated with new debt. Indeed, their actions will probably make the problems worse by adding unnecessary and confusing complexity.

This is the first gift that the Greeks bring us: what we are seeing in Greece is not just “the end of growth” — we are witnessing the “start of shrinkage”. More on this in future posts — suffice to say for now that this is a very scary observation.

Complexity

The physical limits that we face as a result of the upcoming Age of Limits is a theme that we will keep coming back to. But there is another lesson that the Greeks give us and that is the diminishing returns to do with increased complexity. And it is a lesson that engineers and technical professionals would do well to heed.

 The European Union (EU) is bureaucratic — it issues thousands of rules in all walks of life. The reason for this is not a casual byproduct of the Union — it is the basis of its existence. By forcing the different nations to conform to the rules the people will become more unified (it is hoped).

Straight banana
Most of the rules can probably be justified on their own merits. But some, such as the one that led to the infamous “Straight Banana” controversy, are questionable. In this case Commission Regulation Number 2257/94 stipulated that bananas must be “free from abnormal curvature of the fingers”. This rule led to many jokes about grocery stores being forced to sell only straight bananas. But jokes are funny because they reflect real life. In this case it would, of course, be much simpler to let grocers offer different types of banana and let the customers choose those that they prefer. But allowing the free market to operate in this manner is against the very philosophy of the EU. The burden on society generated by EU rules is not an accidental byproduct — it is the very raison d’être for the EU’s existence.

Not only does a plethora of rules create the occasional absurdity, at a deeper level they create huge amount of complexity. This complexity then creates two problems. First is the direct cost. It takes money to hire the people who write and enforce the rules. And that money has to be paid by taxes. In addition, the companies that are subject to all the rules and regulations have to hire their own people to make sure that they are in compliance. And they have to modify their facilities in order to conform to the rules. None of this investment is subject to financial scrutiny: rules are rules and they must be followed — arguments to do with common sense and return on investment receive very little attention. Yet the taxes and other costs to do with increased rule-making must come, at the end of the day, from productive activities to do with industry and agriculture. If the rules have the effect of killing industry, or driving it to a less restrictive location, then the whole system will starve to death.

So, the reaction of industrial managers tends to be, “Why bother?” Why go to all the trouble of building a chemical plant or refinery when the rules are so onerous? In my post A Magnificent Navy on Land I quote from an open letter from Jim Ratcliffe, Chairman of INEOS, to Mr. Barroso of the European Commission.

I wish to express my deepest concerns about the future of the European chemical industry. Sadly, I predict that much of it will face closure within the next 10 years . . .

In the UK we have seen 22 chemical plant closures since 2009 and no new builds . . .

I can see green taxes, I can see no shale gas, I can see closure of nuclear, I can see manufacturing being driven away.

Hence the physical economy continues to decline and debts that paid off because the rules contribute little to true growth.

But a second problem to do with increased complexity, and one that gets less attention, is that no one can really understand or manage complex systems. People operate in their professional silos; they do not understand how their actions are affecting the overall system. This is not because these people are foolish or willfully ignorant — it is because the systems that they supposedly manage are so complex that they cannot be understood by any human being.

An example was provided this week at the Resource Crisis site. In it the author, Ugo Bardi, reported on a conference to do with food supply that he attended. He states,

The food supply system is a devilishly complex system and it involves a series of cross linked subsystems interacting with each other. 

He notes that each person at the conference was generally very knowledgeable about one area such as agriculture or food distribution or climate change or resource limits. But no one understood all of these issues, nor how they might interact with one another. Instead each person pursues a process of linearization whereby making one change will have a desired effect without considering its systems impact. In particular, they do not give consideration to the possibility that their particular solution might actually make overall conditions worse.

In his book The Collapse of Complex Societies Joseph Tainter states that the response of many (not all) societies to problems is to increase complexity. This process continues until the costs of incremental complexity are greater than the commensurate benefits. At that point collapse starts. He makes the following points:

  1. Growth comes from increased complexity because it is useful in solving problems;
  2. Increased growth and increased energy use go hand in hand — they cannot be separated;
  3. Complexity is not free — there is always a cost;
  4. When the cost/benefit crosses a threshold decline starts; and
  5. Decline is associated with increased simplification (which is generally involuntary).

In other words societies initially respond to problems by adding complexity. However there is a cost associated with this complexity. The costs rise but the returns become increasingly marginal. Eventually a tipping point is reached and the society collapses to a much simpler state.

There are reasons to believe that our society may be at such a point because the supply of available energy is decreasing (point #2 above).

The Greek Gift

At the start of this essay we alluded to the gift that the Greeks brought. The Greeks (actually the Achaeans) placed a wooden horse at the gates of Troy. The Trojans foolishly dragged that horse into their city, whereupon Greek soldiers leaped from the belly of the horse and conquered Troy.

But in our situation, if we look more deeply into what is going on in Greece (and many other highly indebted nations), there are useful if difficult lessons to be learned, particularly if we understand that the issues go beyond day to day economics and politics. Once we realize that our problems are caused by resource and environmental limits that prevent the creation of additional complexity then we may be able to work toward solutions, even though those solutions could well result in a conscious decision to simplify and therefore shrink our industrial systems.

l’Optimise

Voltaire

Voltaire

The above sub-title comes from Voltaire’s book Candide, a work that I have referred to in previous posts. His satirical writing can be seen as a work of optimism in spite of all the bad things that take place. Therefore, where possible, I will end these posts with a few words of optimism. (I started doing this in Denying Blackbeard — Part 2 and Renaissance Man and Climate Change.) In this post I offer the following thought.

Our industrial and management systems are  complex. A return to simplicity will occur. Those organizations that wish to achieve high levels of safety and profitability in the new world of an Age of Limits will intentionally seek to make their systems simpler.

Books

Our books, published by Elsevier, include the following titles.

Books from Sutton Technical Books

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5 responses to “16. Greek Gifts

  1. Sam taylor July 15, 2015 at 5:23 am

    Mr Sutton,

    I would caution against assigning too much importance to the Greek crisis in terms of its overall significance as regards the hitting of limits. This is something that a number of online commentators (such as Prof Bardi) are currently doing, but I think caution is advised in this case. The flaws in the current design of the eurozone were pointed out long ago by people as varied as Nicholas Kaldor back in the 1970’s ( http://www.concertedaction.com/2012/08/16/nicholas-kaldor-on-the-common-market/ ) and Wynne Godley in the early 90’s ( http://www.lrb.co.uk/v14/n19/wynne-godley/maastricht-and-all-that ). The current system is deeply flawed in that there is no mechanism for rebalancing the various economies within the eurozone, apart from depression. If the individual nations all had free floating currencies, or if there was a mechanism for financial transfer between the states, as exists in the USA, then the current crisis would be easily avoided. However, the euro basically forces national governments to borrow ina foreign currency, which is always a recipie for disaster. The large surpluses being run by Germany end up as large deficits in periphery countries, and when something like the financial crisis hits and countries need to run counter-cyclical deficits in response, disaster ensues.

    That is not to say that limits might not have played a part. This is, after all, the ongoing european leg of the 2009 GFC, which probably had high resources costs as a causative factors buried somewhere inside. However I think this situation is more a lesson that a badly designed system can in fact make crises much worse than they need to be.

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    • suttonbooks July 15, 2015 at 4:51 pm

      Sam:

      Thanks for your comment. When the EU was formed I was supportive of the idea free movement of goods, people and money. But I was less sure about the Euro. As you note, its lack of flexibility seems to be its undoing. The various short and medium-term solutions really aren’t solutions.

      Regarding the Age of Limits, I go back to Tainter’s insights (for those without his book this video https://www.youtube.com/watch?v=G0R09YzyuCI is informative). He states,

      1. Societies respond to problems by increasing complexity.
      2. In order to do this they need to increase energy consumption.

      The reverse holds true. If energy available goes down then simplicity is forced upon us and our economies shrink.

      I suspect that many of the problems that we are all facing are due to the fact that we have gone “over the hump”, so to speak and that we are on the downward slope. My thought/question is that Greece is merely one of the first countries to start to feel the impact of decline because its economic problems are more severe than most. If this is the case then no amount of fiddling with political and economic structures is going to help. Greece is simply the first out the box. We will all follow.

      It is this thought which prompted an early post in this series: Peak Forests (https://peakengineering.wordpress.com/2015/04/17/2-peak-forests/). We are at a node. We can decline into a Dark Ages, or we can invent a new form of society just as Thomas Newcomen and others of his time did.

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      • Sam Taylor July 15, 2015 at 6:19 pm

        I’m familiar with Tainter’s work, and am very much in agreement with it. Incidentally have you read the book Drilling Down, that he co-wrote with Tad Patzek? As a safety engineer with experience in the oil industry (also where I presently work) I would find interesting, though it might cover ground that you’re familiar with.

        I think I am in large agreement with you regarding our likely trajectory, though I don’t know whether we’re quite over the hump or not, so to speak. Greece I think is largely the fault of the euro, but certainly the ongoing collapse of many states in the middle east is troubling. Shale oil seems to have perhaps bought us some time, and I’ve seen comments from Charles Hall that the EROI of shale wells is perhaps better than first anticipated. However this is largely details, I suppose, what’s a decade either way in the scheme of things?

        Your comment about Nercomen is valid, and indeed links up with some interesting work being done by Geoffrey West at the Santa Fe Institute on the scaling and sustainability of cities. West points out that we’re on a constantly accelerating treadmill, and must constantly innovate to avoid collapse. Newcomen’s steam engine certainly fists into this paradigm. I can’t really do his ideas justice here, but the following talk is worth a watch ( https://www.youtube.com/watch?v=etfRE5-YlX ). Fascinating stuff!

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  2. Pingback: 17. The Red Queen Dilemma | Engineering in an Age of Limits

  3. Etienne Bayenet August 8, 2015 at 2:45 am

    Hello,

    I just finished a very interesting book about economy “23 Things They Don’t Tell You About Capitalism ” written by Ha-Joon Chang. He discusses a lot the “ruling” aspects and explains that it is needed because we have a limited capability of managing complexity. He also discusses and argues against the end of industrial economy concept that would be possible because of the virtual economy. The way government can improve the economy of a country is also discussed, with example of successes and disasters.
    He totally misses the limit discussion, but this doesn’t reduce the overall interest of the book. It is somehow an economical history book.

    Regarding the price of oil, I believe that the 2008 crisis changed our way of managing energy just like the seventies. We started to save energy, started saving programs and trainings, industrialized energy saving technologies (like LED lightning, hybrid cars…) and these changes could keep oil prices down for a few years or allow GDP growth with a lower energy consumption growth. Energy cost is now seen as a risk, which wasn’t the case 10 years ago, now people are ready to pay a little bit more to protect themselves from fluctuations.

    Best regards

    Like

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