Abstract:
‘System Change Not Climate Change’ has become a slogan for a global movement that connects the climate crisis to the current economic system. Part of the required ‘system change’ – which is well recognized – is a necessary transition to net-zero energy systems. What is less understood, is that past energy transitions have also entailed major changes to the economy.
Moreover, two further challenges may be posed:
- There is no macro-economic theory of energy transitions
- The energy transitions literature missed some of the most critical details of the twentieth century
To begin to understand the physical basis of how economies change, we first explore conceptual relationships between the economy, the economic system and the physical system. We then turn to the work of charismatic economist Joseph Schumpeter, known for his writings on innovation, entrepreneurship, economic development, creative destruction, and business cycles.
Schumpeter’s Theory of Economic Development included five physical cases in which new combinations of materials influence the economy. Unfortunately, however, Schumpeter’s fascination with supposedly endogenous business cycles created a concept that blinds economics from the physical world. Close examination of the points of crisis in the technology long waves (Kondratieff Cycle), nonetheless, reveals that they were energy shocks.
