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Downloaded from 443/Energyineconomicgrowth.Pdf, on May 1, 2015 UC Berkeley UC Berkeley Electronic Theses and Dissertations Title The Ecological Keynesian: Energy, Money, and Oil Cycles in the Global System Permalink https://escholarship.org/uc/item/66w9g7d6 Author Sager, Jalel Publication Date 2015 Peer reviewed|Thesis/dissertation eScholarship.org Powered by the California Digital Library University of California The Ecological Keynesian: Energy, Money, and Oil Cycles in the Global System by Jalel Marti Sager A dissertation submitted in partial satisfaction of the requirements for the degree of Doctor of Philosophy in Energy and Resources in the Graduate Division of the University of California, Berkeley Committee in charge: Professor Richard B. Norgaard, Chair Professor Daniel M. Kammen Professor Paul Pierson Spring 2015 The Ecological Keynesian: Energy, Money, and Oil Cycles in the Global System Copyright © 2015 by Jalel Marti Sager Abstract The Ecological Keynesian: Energy, Money, and Oil Cycles in the Global System by Jalel Marti Sager Doctor of Philosophy in Energy and Resources University of California, Berkeley Professor Richard B. Norgaard, Chair This dissertation focuses on energy-centered great power nations in the 20th and early 21st centuries—the United States, Great Britain, and China—and the economic waves created by their changing rates of energy production. Its goal is a better explanation of energy’s entanglement with global production, trade, and monetary systems, and of the crises linking them in the 1970s and 2000s. The post-Bretton Woods monetary-energy regime receives special attention, as does its future, given trajectories of key nations and the need to move toward low-carbon energy sources. I proceed by integrating ecological economic and political economic thought, focusing on work of William Stanley Jevons and John Maynard Keynes that addresses key integrated macroeconomic-resource questions. I adapt natural resource linkages made by Keynes and Jevons—especially the influence of harvest fluctuations on the economy, and the investment cycles that transmit them—to investigate oil’s effect on US internal/external balances after Bretton Woods. In doing so I identify a clear signal of an “oil harvest cycle” regulating those balances. The oil harvest cycle provides provisional answers to important unresolved questions, such as the exact channels through which oil price shocks affect the economy (“Bernanke’s Puzzle"). I also describe how the oil price functions as an adjustment method for sterilized US external balances in the “disequilibrium system” entrenched in the 1970s. Finally, I relate these mechanisms to the “pulsing paradigm” of ecosystems proposed by Eugene and Howard Odum, arguing that an analogous signal appears in the economy via its key natural resource cycles. 1 For John Maynard Keynes, who sought balance, and for William Stanley Jevons, who wished to be “powerfully good…not towards one, or a dozen, or a hundred, but towards a nation or the world.” i Acknowledgements I am grateful to the following people, who all in some way contributed to this work. Richard Norgaard, Daniel Kammen, Paul Pierson, and Isha Ray for providing me the intellectual space, discipline, and support I needed. John Harte for his scholarly model and for explaining something of ecology to me. Gene Rochlin for his interest and welcome presence. Duncan Callaway and David Anthoff for stimulating conversations and tips. Despite the help of these scholars, any errors that may be in the manuscript are of course attributable only to me. My beautiful friends and colleagues at Berkeley’s Energy and Resources Group—so many humbling, generous people over the years I cannot thank them all. Kay Burns, Sandra Dovali and the wonderful ERG staff past and present, who made administrative life relatively easy. My parents, all of them, for giving me books and introducing me to the world. My lovely sisters and brother, for once in a while letting me lecture them without rolling their eyes. Jialee Chau, for unwavering support. My friends, who always kept me on my toes by asking when I would finish, and Jules, for floating seminars. My co- workers, Jonathan Lee and Austin Cappon, for their forbearance during writing. My dog Noodle, beloved writing companion, to whom I owe more than a few long walks. ii Table of Contents Dedication .................................................................................................................................................................................... i Acknowledgements ............................................................................................................................................................... iv List of Figures .......................................................................................................................................................................... iv List of Tables .............................................................................................................................................................................. v Introduction: Signal, Response, Evolution .................................................................................................................. 1 Chapter 1. The Crown Joules: Resource Peaks and Monetary Hegemony ................................................... 4 A Material Base for the Economy ............................................................................................................................... 4 The “Energy Question” .................................................................................................................................................... 5 Oil: Good as Gold .............................................................................................................................................................. 9 The Chinese Coal Question .......................................................................................................................................... 12 Beyond Chinese Coal and Global Oil Peaks .......................................................................................................... 16 Chapter 2. Energy’s Economy: Mr. Jevons, State Power, and Sunspots ...................................................... 20 The Jevons-Keynes Harvest Cycle ............................................................................................................................ 20 Changing Surplus and the Organization of Political Economies ................................................................. 26 Energy’s Importance in Production: a Neoclassical Blind Spot ................................................................. 29 Chapter 3. Energy, Money, and the Structure of the Global System .............................................................. 34 Systemic Causation and an Ecological Approach .............................................................................................. 43 Patterns in National Energy Signatures Over Time ......................................................................................... 46 How We Are Stuck: Energy Yields and Global Stagnation ............................................................................ 54 Chapter 4. The Oil Harvest Cycle (Part 1) ................................................................................................................. 58 Solving “Bernanke’s Puzzle”: Shift Focus to Oil Investment ........................................................................ 58 The Signal: Oil Prices .................................................................................................................................................... 61 Effective Demand ............................................................................................................................................................ 63 A Word on Methods ....................................................................................................................................................... 64 Rig Count and Recessions: The Oil Harvest Cycle & Investment “Ecosystem” .................................... 66 Chapter 5. The Oil Harvest Cycle (Part 2) ................................................................................................................. 73 Investment Shifts ............................................................................................................................................................ 73 Labor Intensity ................................................................................................................................................................. 81 What Does This Model Do? What Does It Solve? .............................................................................................. 83 Political Economic Effects ........................................................................................................................................... 86 Interest Rates .................................................................................................................................................................... 87 Chapter 6. The Oil Standard: Energy and US External Balances .................................................................... 91 The Oil Price as Adjustment Signal .......................................................................................................................... 91 US Trade Imbalances Since the End of Bretton Woods .................................................................................
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