Bringing Energy Back into the Economy

Abstract

This paper works out some of the basic properties of an economy where energy is the driving force behind all economic activities. The economy now consists of streams of energy conversions that direct energy to the production of goods and services. The focus on energy generates a variety of insights. It yields a new taxonomy of economies and economic activities; allows a better grasp of the tasks performed by labor and capital; raises the prospect of examining growth as the speeding up of machines; and identifies greater use of energy as an important independent source of growth. In addition, I use these results to explain the near stagnation in living standards in agrarian economies in the millennia before 1800, and the dramatic acceleration in growth since that date.