Economics meets physics – literally

By chance, two books about the intersection of economics and the physical world have landed recently here at Enlightenment Towers recently, by David Humphreys and by Vaclav Smil.

[amazon_image id=”113744200X” link=”true” target=”_blank” size=”medium” ]The Remaking of the Mining Industry[/amazon_image] [amazon_image id=”0262029146″ link=”true” target=”_blank” size=”medium” ]Power Density: A Key to Understanding Energy Sources and Uses[/amazon_image]

I love business histories, with all their detail about how decisions get made with no reference at all to marginal cost=marginal revenue, and David Humphreys used to be chief economist of Rio Tinto and then Norislk Nickel in Russia. He knows more than probably anyone about the economics of the mining industry, so this book promises to be full of interesting nuggets (so to speak). Paging through, one of his main themes looks to be the importance of geopolitics for the industry, and the role of government in creating a stable legal framework that will enable investment with a decades-long payoff to occur. He concludes: “The world does not have a resource problem. It cannot be ruled out, however, that it may face an investment problem.”

I also like Vaclav Smil’s previous books, and (well of course I’d like that one!), packed full of engineering insight. This one tells me that power density is “the rate of energy flux per unit of area” – huh? – and that moving to low power density renewable fuels will require “a profound spatial restructuring of the energy system.” My guess is that it means new transmission and distribution grids, but I’ll have to read it to be sure. The final sentence, in bold italics reads: “New energy arrangements are both inevitable and desirable, but without any doubt, if they are to be based on large scale conversions of renewable energy resources, then the societies dominated by megacities and concentrated industrial production will require a profound spatial restructuring of the energy system, a process with many major environmental and socioeconomic consequences.”



Energy seems bound to stay in the news one way or another, whether it’s bills and competition policy, or fracking, or energy market reform, or the climate change debate. So anybody who didn’t read Dieter Helm’s  when it was first out can now pick up the paperback. I reviewed it at the time. It’s a clear and well-argued read, as you would expect from a doyen of energy economics. Dieter also has an interesting article on infrastructure and the state due out in the Oxford Review of Economic Policy – it will be available in early August via his website, links on the right hand side.

[amazon_image id=”0300186592″ link=”true” target=”_blank” size=”medium” ]The Carbon Crunch: How We’re Getting Climate Change Wrong – and How to Fix it[/amazon_image]

Also, next year the edited volume by Dieter Helm and Cameron Hepburn (a future doyen),
  will be published by Oxford University Press.