There is a good deal of worry about the robustness of our nation’s future economy. And rightly so. Especially since the recession of 2008 and 2009, and as shown in the chart below, we still have perhaps 5 million fewer jobs today than typical forecasts suggested in 2005, even as we also have about 30 million more people to support with those available jobs.
Comparing Economic Projections and Actual Outcomes in the U.S. (2005 to 2017)
In an effort to understand why economic performance has been so lackluster, we are constantly taking our economic temperature. We measure it every way we can. But it is also true that – other than the occasional surprise – what you measure is what you find, and we may not be measuring all of the right factors.
The current measure of our economic well-being is the ebb and flow of dollars transacted in the marketplace. These dollars, often expressed as Gross Domestic Product (GDP), are usually indexed against things like investment, labor output or population. From these various indices, we attempt to obtain a reading on how well the economy is doing. However, examining the economy from a resource utilization perspective rather that a market valuation may yield an entirely different understanding of the economic process. To better illustrate this point let us borrow some momentary insights from Arizona’s Sonoran desert environment.
In the desert, similarities in plant appearance are poor indicators of whether or not plants are related to one another. While the agave plants have vegetative structures similar to those of the aloe family, neither plant lineage can be determined until we examine their flowers. The vegetative parts of both the agave and the aloe plants are mostly products of the very few adaptive mechanisms available to help a plant survive in the desert.
These survival mechanisms include extensive root systems and the ability to store water in the leaves and the stem of a plant. With so few adaptive features available to them, even plants from unrelated families may look very much alike.
Flowers, in contrast to the plant structures, are the result of intricate relationships with the animals that pollinate them. Because of this dynamic two‑way interaction with animals and insects, flowers are more complex than the leaves or stems of a plant.
The relationship between the agave and the aloe plants is revealed, not by looking at their vegetative structures, but by comparing their flowers and fruits. It turns out that despite initial appearances, the Sonoran Agave and the South African Aloe have entirely different histories and origins.
In a similar way, we may develop a different understanding of why the nation’s lagging job creation is so lackluster if we measure it in a wholly different manner. And here we might build on the work of my colleagues Bob Ayres and Benjamin Warr in their 2009 book, The Economic Growth Engine: How Energy and Work Drive Material Prosperity. Measurements in their analysis might include, for example, not just how much energy we are actually throwing at our various economic activities but, more critically, we might ask how efficiently we actually are in converting that energy into useful goods and services. This might reveal different insights than if we only ask how many dollars are consumed in the production process.
As updating the data from Ayres and Warr might suggest, when viewed from an energy rather than a market perspective, the American economy is perhaps 15 percent energy (in)efficient. It takes energy to explore, mine and produce or transform coal, the oil and the natural gas needed to power our homes schools and businesses. It also takes energy to clean up the many wastes produced by that production and consumption of energy. Based on a reworking of the Ayres-Warr methodology we waste, in short, about 85 percent of all the energy consumed in our various economic activities.
As we might imagine, that level of huge waste creates an array of costs that might otherwise constrain a more robust economy. That level of waste adds a very large burden to our air, land and water resources. But we would not find this by looking only at the dollar transactions of the marketplace. As with the Sonoran Agave and the South African Aloe, we need to look at more than the familiar indicators to understand the full historical relationships that determine the robustness of nation’s economy.
—– John A. Skip Laitner