A link to Man-hours and Distribution Man-hours and Distribution M. King Hubbert
M. King Hubbert & the Technocracy technate design. YouTube - 1976 Hubbert Clip
* TTTTT home page Technocracy technate Think Tank project``We have, for example, the little matter of technological unemployment, which, in spite of the application of the most potent of witchcraft by our very best medicine men in an effort to conjure it out of existence, appears to be with us yet.''
* Technocracy Technate links and connectors and a Forum on Technocracy design
* Hubbert bibliography Hubbert Bibliography Compilation Project
* Geological Society of America M. King Hubbert at 100: The Enduring Contributions of Twentieth-Century Geology’s Renaissance Man
* (Some quotes from : Facts Of Life 1935, by M. King Hubbert)
``Lest there still be confusion on this point, let us review the pertinent facts: Every piece of machinery introduced since the beginning of the use of tools has resulted in some job or other requiring fewer man-hours for its performance than was previously the case. It was for that purpose that the tools were developed and introduced in the first place. In the industrial growth of North America, new tools and machines were introduced but slowly at first. There came the steam engine, then steamships and railroads. There was the cotton gin, the reaper, and better plows.
``Man-hours were displaced in communication when the telegraph, and later the telephone, superseded the pony express. Finally, during the last 50 years, the whole works has blossomed forth into the finest and most complex array of industrial equipment ever seen by the eyes of man. And without exception each and every one of these developments has resulted in the doing of the job in hand with fewer man-hours than was ever before the case.''
Hubbert's Prescription for Survival,
A Steady State Economy
Robert L. Hickerson • March 1, 1995
The late Dr. M. King Hubbert, a geophysicist, is well known as a world authority on the estimation of energy resources and on the prediction of their patterns of discovery and depletion.
- He was probably the best known geophysicist in the world to the general public because of his startling prediction, first made publicly in 1949, that the fossil fuel era would be of very short duration.
- His prediction in 1956 that U.S. oil production would peak in about 1970 and decline thereafter was scoffed at then but his analysis has since proved to be remarkably accurate.
Less well known were Hubbert's studies since 1926 on the rate of industrial growth and of mineral and energy resources and their significance in the evolution of the world's present technological civilization. 3 Clark in Geophysics in February 1983 states ``In recent years, he (Hubbert) has assaulted a target -- which he labels the culture of money -- that is gigantic even by Hubbert standards.
His thesis is that society is seriously handicapped because its two most important intellectual underpinnings, the science of matter-energy and the historic system of finance, are incompatible. A reasonable co-existence is possible when both are growing at approximately the same rate.
That, Hubbert says, has been happening since the start of the industrial revolution but it is soon going to end because the amount the matter-energy system can grow is limited while money's growth is not.''
``I was in New York in the 30's. I had a box seat at the depression,'' Hubbert says. ``I can assure you it was a very educational experience. We shut the country down because of monetary reasons. We had manpower and abundant raw materials. Yet we shut the country down. We're doing the same kind of thing now but with a different material outlook.
We are not in the position we were in 1929-30 with regard to the future. Then the physical system was ready to roll. This time it's not. We are in a crisis in the evolution of human society.
It's unique to both human and geologic history.
It has never happened before and it can't possibly happen again.
You can only use oil once. You can only use metals once.
Soon all the oil is going to be burned and all the metals mined and scattered.'' That is obviously a scenario of catastrophe, a possibility Hubbert concedes. But it is not one he forecast. The man known to many as a pessimist is, in this case, quite hopeful. In fact, he could be the ultimate utopian.
We have, he says, the necessary technology. All we have to do is completely overhaul our culture and find an alternative to money.
``We are not starting from zero,'' he emphasizes. ``We have an enormous amount of existing technical knowledge. It's just a matter of putting it all together. We still have great flexibility but our maneuverability will diminish with time.''
A non-catastrophic solution is impossible, Hubbert feels, unless society is made stable. This means abandoning two axioms of our culture . . . the work ethic and the idea that growth is the normal state of affairs. Hubbert challenges the latter mathematically and concludes the exponential growth of the last two centuries is the opposite of the normal situation.
``It is an aberration. For most of human history the population doubled only once every 32,000 years. Now it's down to 35 years. That is dangerous. No biologic population can double more that a few times without getting seriously out of bounds. I think the world is seriously overpopulated right now. There can be no possible solutions to the world's problems that do not involve stabilization of the world's population.''
Hubbert's ideas about work are even more heretical. Work is becoming, he says, increasingly unimportant. He thinks it is conceivable that the future work week might be on the order of 10 hours. Indeed, because production will have to be limited by increasingly limited mineral resources, that might be inevitable. And that, Hubbert stresses, could be the foundation of an earthly paradise.
``Most employment now is merely pushing paper around,'' he says. ``The actual work needed to keep a stable society running is a very small fraction of available manpower.''
The key to making this cultural alteration is to come up with a limitless supply of cheap energy. Hubbert feels the answer is obvious--solar power--and he does not feel more technological breakthroughs are needed before it can be made universally available. His faith is not that of a knee-jerk trendy but that of a doubter who did much studying before his conversion.
``Fifteen years ago I thought solar power was impractical because I thought nuclear power was the answer. But I spent some time on an advisory committee on waste disposal to the Atomic Energy Commission. After that, I began to be very, very skeptical because of the hazards. That's when I began to study solar power. I'm convinced we have the technology to handle it right now. We could make the transition in a matter of decades if we begin now.''
On June 4th, 1974 Hubbert testified before Representative Morris K. Udall's Subcommittee on the Environment.3
In his 21 page written statement he presented his familiar lecture on various growth curves, their equations, curves of world and U.S. production of fossil fuels as well as projections for the future.
He next discussed the cultural aspects of the growth problem. He states, ``during the last two centuries of unbroken industrial growth we have evolved what amounts to an exponential-growth culture.
Our institutions, our legal system, our financial system, and our most cherished folkways and beliefs are all based upon the premise of continuing growth, Since physical and biological constraints make it impossible to continue such rates of growth indefinitely, it is inevitable that with the slowing down in the rates of physical growth cultural adjustments must be made.
One example of such cultural difficulty is afforded by the fundamental difference between the properties of money and those of matter and energy upon which the operation of the physical world depends.
Money, being a system of accounting, is, in effect, paper and so is not constrained by the laws within which material and energy systems must operate.
In fact money grows exponentially by the rule of compound interest.'' He next derives the equations for the growth of the stock of money, the rate of industrial growth and the generalized price level.
The expression for the generalized price level states that this level ``should increase exponentially at a rate equal to the difference between the rate of growth of money and that of industrial production.
In particular, if the industrial growth rate a and the average interest rate i have the same values, then the ratio of money to what money will buy will remain constant and a stable price level should prevail.
Suppose, however, that for physical reasons the industrial growth rate a declines but the interest rate i holds steady. We should then have a situation where i is greater than a with the corresponding price inflation at the rate (i-a).
Finally consider a physical growth rate a=0, with the interest rate i greater than zero. In this case, the rate of price inflation should be the same as the average interest rate.
Conversely, if prices are to remain stable at reduced rates of industrial growth this would require that the average interest rate should be reduced by the same amount.
Finally, the maintenance of a constant price level in a non-growing industrial system implies either an interest rate of zero or continuous inflation.
As a check on the validity of these deductions, consider the curves of U.S. energy and pig-iron production (which he shows in Figures 17 and 18. in the file below) Because energy is a common factor in all industrial operation and pig-iron production one of the basic components of heavy industry, the growth in the production of energy and pig iron is a very good indicator of the total industrial production.
Figure 17 in the file below is a graph plotted on a semi logarithmic scale of the production of energy from coal, oil, gas, and water power -- from 1850 to 1969. From 1850 to 1907 the production of energy increased exponentially at a rate of 6.91 percent per year, with a doubling period of 10.0 years. Then during the three-year period from 1907 to 1910, the growth rate dropped abruptly to a mean rate of 1.77 percent per year and the doubling period increased to 39 years.
Figure 18 in the file below is a corresponding plot of U.S. pig-iron production. The pig-iron curve resembles that of energy so closely that the two curves can hardly be told from one another. Pig-iron production also grew exponentially at a rate close to 7 percent per year until about 1910, when it too broke abruptly to a lower rate of less that 2 percent per year. This abrupt break at about 1910 represents a major event in the industrial history of the United States, yet we have barely been aware that it happened.
In parallel with this industrial growth during most of the 19th century and continuing until 1929, the mean monetary interest rate was also about 7 percent per year. Therefore until 1910 the price level, except for temporary disturbances, should have remained comparatively stable. Following 1910, when the physical growth rate dropped to about 2 percent per year, whereas the interest rate remained at about 7 percent, a price inflation at a rate of about 5 percent per year should have begun. Despite fluctuations, the interest rate has remained consistently higher than the physical growth rate from 1910 to the present, which implies that we should have had an almost continuous price inflation for the last 64 years.
A graphical illustration of the relations between the monetary growth, physical growth and price inflation is shown in Figure 19 in the file below. The upper straight line represents the exponential growth of money at the interest rate i; the lower curve the physical growth at the lower rate a. The ratio of M (money growth) to Q (industrial growth) at any given time is proportional to the distance between those curves. If the curves are parallel, the spacing is constant and a stable price level will prevail. If the curves are divergent to the right, the price level will increase at the rate (i-a)''
These curves depict the approximate relation between the monetary growth rate and the physical growth rate that has prevailed in the United States since 1910.
Finally, as confirmatory evidence, there is shown in Figure 30, below a graph of the consumer price index as computed for each year from 1800 to 1971 by the U.S. Bureau of Labor Statistics. The three principal distortions coincide with the War of 1812, the Civil War, and World War 1. Disregarding these, and drawing a smooth curve under the bases of each gives a very informative result. For the period from 1800 to 1910 the consumer price level remained remarkably stable. Beginning about 1910, at the time of the abrupt drop in the rate of industrial growth, prices began to inflate and they have continued to do so to the present time.
The foregoing example has been discussed in detail because it serves as a case history of the type of cultural difficulties which may be anticipated during the transition period from a phase of exponential growth to a stable state. Since the tenets of our exponential-growth culture (such as a non zero interest rate) are incompatible with a state of non growth, it is understandable that extraordinary efforts will be made to avoid a cessation of growth. Inexorably, however, physical and biological constraints must eventually prevail and appropriate cultural adjustments will have to be made.''
During the question period after Dr. Hubbert's testimony Mr. Udall asked,--``this inflation that we are all so concerned about now may not necessarily be mismanagement of the economy or some temporary problems necessarily, but may be built into this whole problem of exponential growth in terms of the population and use of resources, and so on. Is that what you are saying?'' Dr. Hubbert's reply was, ``It has been going on, the record is unequivocal, since 1910, disregarding the disturbance of World War I.''
Does Dr. Hubbert have a recommendation for the overhaul of our culture and an alternative to money? When I spoke to him by telephone in about 1970 he confirmed that he did.
His suggestion was that income in units of energy could be used. In a 30 page research paper which he published while at Columbia in August 1936 titled Man-Hours--A Declining Quantity he wrote, ``the American public has watched both government and business indulge in the curtailment of food production and its wholesale destruction at a time of the greatest human need in American history.
They have seen their factories closed at a time when a large fraction of the population has been in want of the products of industry and when millions have been willing and anxious to work.-- What is there so difficult about the problem?
What is it that has to be done in order to solve it?
Simply and solely that our Continental totality shall be operated at a maximum of efficiency with a maximum conservation of resources for the maximum production and distribution of physical wealth--with a resultant standard of living greater than has ever been obtained on the North American Continent.
To do this requires a distributive mechanism that will deliver the products of industry to the consuming public at whatever rate is required.
Getting Something For Nothing
In the distribution to the public of the products of industry, the failure of the present system is the direct result of the faulty premise upon which it is based. This is: that somehow a man is able by his personal services to render to society the equivalent of what he receives, from which it follows that the distribution to each shall be in accordance with the services rendered and that those who do not work must not eat. This is what our propagandists call 'the impossibility of getting something for nothing.'
Aside from the fact that only by means of the sophistries of lawyers and economists can it be explained how, on this basis, those who do nothing at all frequently receive the largest shares of the national income, the simple fact is that it is impossible for any man to contribute to the social system the physical equivalent of what it costs the system to maintain him form birth till death--and the higher the physical standard of living the greater is this discrepancy. This is because man is an engine operating under the limitations of the same physical laws as any other engine. The energy that it takes to operate him is several times as much as any amount of work he can possibly perform. If, in addition to his food, he receives also the products of modern industry, this is due to the fact that material and energy resources happen to be available and, as compared with any contribution he can make, constitute a free gift from heaven.
Stated more specifically, it costs the social system on the North American Continent the energy equivalent to nearly 10 tons of coal per year to maintain one man at the average present standard of living, and no contribution he can possibly make in terms of the energy conversion of his individual effort will ever repay the social system the cost of his social maintenance. Is it not to be wondered at, therefore, that a distributive mechanism based upon so rank a fallacy should fail to distribute; the marvel is that it has worked as well as it has.
Since any human being, regardless of his personal contribution, is a social dependent with respect to the energy resources upon which society operates, and since every operation within a given society is effected at the cost of a degradation of an available supply of energy, this energy degradation, measured in appropriate physical units such as kilowatt-hours, constitutes the common physical cost of all social operations. Since also the energy-cost of maintaining a human being exceeds by a large amount his ability to repay, we can abandon the fiction that what one is to receive is in payment for what one has done, and recognize that what we are really doing is utilizing the bounty that nature has provided us.
Under these circumstances we recognize that we all are getting something for nothing, and the simplest way of effecting distribution is on a basis of equality, especially so when it is considered that production can be set equal to the limit of our capacity to consume, commensurate with adequate conservation of our physical resources.
Income in Units of Energy
On this basis our distribution then becomes foolproof and incredibly simple. We keep our records of the physical costs of production in terms of the amount of extraneous energy degraded. We set industrial production arbitrarily at a rate equal to the saturation of the physical capacity of our public to consume.
We distribute purchasing power in the form of energy certificates to the public, the amount issued to each being equivalent to his pro rata share of the energy-cost of the consumer goods and services to be produced during the balanced-load period for which the certificates are issued. These certificates bear the identification of the person to whom issued and are non negotiable.
They resemble a bank check in that they bear no face denomination, this being entered at the time of spending.
They are surrendered upon the purchase of goods or services at any center of distribution and are permanently canceled, becoming entries in a uniform accounting system.
Being nonnegotiable they cannot be lost, stolen, gambled, or given away because they are invalid in the hands of any person other than the one to whom issued. If lost, like a bank checkbook, new ones may be had for the asking. Neither can they be saved because they become void at the termination of the two-year period for which they are issued. They can only be spent.
Contrary to the Price System rules, the purchasing power of an individual is no longer based upon the fallacious premise that a man is being paid in proportion to the so-called 'value' of his work (since it is a physical fact that what he receives is greatly in excess of his individual effort) but upon the equal pro rata division of the net energy degraded in the production of consumer goods and services.
In this manner the income of an individual is in nowise dependent upon the nature of his work, and we are then left free to reduce the working hours of our population to as low a level as technological advancement will allow, without in any manner jeopardizing the national or individual income, and without the slightest unemployment problem or poverty.''
Hubbert goes on to state that following a transition the work required of each individual, need be no longer than about 4 hours per day, 164 days per year, from the ages of 25 to 45. Income will continue until death. ``Insecurity of old age is abolished and both saving and insurance become unnecessary and impossible.''
My personal conclusions and recommendations are:
- We will never again be able to get sufficient growth of the economy to eliminate or even markedly reduced unemployment. NAFTA, GATT, and Clinton's hope of growing the economy to solve unemployment is doomed to failure.
- The promise of competing in the global economy is a hoax perpetrated upon the working and unemployed people of this country because over time a nation needs to buy and sell overseas in roughly equivalent amounts.
- All attempts to reduce the deficit, balance the budget or pay off the national debt are futile. The deficit and the national debt represent the subsidy the government has paid in its attempt to keep growth and unemployment at the level of social tolerance.
- The steady state economy into which we are being inexorably forced implies an interest rate of zero.
- An interest rate of zero (as Hubbert explains) means the end of the money system. We are being forced to completely rethink our cultural ideas about how to organize our economy and distribute purchasing power.
- Increasingly desperate means will be used by those who think we can continue to have business as usual.
- The proposals of Negative Population Growth should be implemented immediately.
- Albert A. Bartlett, Forgotten fundamentals of the energy crisis, Am. J. Phys., Vol. 46. No. 9, September 1978
- Clark, Robert Dean, Assistant Editor, Geophysics: The Leading Edge of Exploration, King Hubbert, February 1983. pp.16-24
- Hubbert, Dr. M. King, research geophysicist, Washington, D.C. June 4, 1974, Testimony before Subcommittee on the Environment of the Committee on Interior and Insular Affairs, House of Representatives, Ninety-Third Congress , Serial no. 93-55 U.S. Government Printing Office, Washington: 1974
- Hubbert, M. King, Man Hours-A Declining Quantity, as Published in Technocracy Series A. No. 8 August 1936. This was later expanded into a pamphlet entitled Man-hours and Distribution
Additional recommended reading material:
- Daly, Herman E. Toward a Steady-State Economy, 1973 W. H. Freeman & Co.
- Daly, Herman E. and Cobb, John B. Jr. For the Common Good, Redirecting the Economy Toward Community, the Environment and a Sustainable Future, 1989 Beacon Press
- Daly, Herman E., & Townsend, Kenneth N. editors, Valuing the Earth, Economics, Ecology, Ethics
- Theobald, Robert, The Challenge of Abundance, 1962 Mentor Books
- Theobald. Robert, The Guaranteed Income, Next Step in Socioeconomic Evolution?, 1967 Anchor Books
- Theobald, Robert, editor, Committed Spending, A Route to Economic Security, 1969 Anchor Books
- Theobald, Robert, The Economics of Abundance, A Non-Inflationary Future, 1970 Pitman Publishing Corp.
- Theobald, Robert, The Rapids of Change, Social Entrepreneurship in Turbulent Times, 1986 Knowledge Systems, Inc.
- Theobald, Robert, Turning the Century, Personal and Organizational Strategies for Your Changed World, 1992 Knowledge Systems, Inc.
- Watt, Kenneth E. F., The Titanic Effect , Planning for the Unthinkable, 1974 Sinauer Associates, Inc.
Part Two : M. King Hubbert on the Nature of Growth
M. King Hubbert • 1974
My name is M. King Hubbert. I am a Research Geophysicist with the U.S. Geological Survey, but I wish to make it clear that I am testifying as an individual and I am not representing the views of the Geological Survey or of the Administration.
My scientific education was received during the 1920's from the University of Chicago from which I have received the degrees B.S., M.S., and Ph.D. jointly in geology and physics with a minor in mathematics.
One half of my professional career, beginning in 1926, has been in both operations and research with respect to the exploration and production of petroleum.
The second half has been divided about equally between university teaching in geology, geophysics, and mineral and energy resources, and work with the Illinois and U.S. Geological Surveys.
In the petroleum industry my work included geological and pioneer seismic explorations in Texas, New Mexico, and Oklahoma during 1926-1928 for the Amerada Petroleum Corporation, and in petroleum exploration and production research during l943-1963 for Shell Oil Company and Shell Development Company in Houston, Texas.
Also, for about a decade of this latter period I was an Associate Director for Exploration and Production Research for Shell during which I helped to organize and staff a major research laboratory for petroleum exploration and production.
My university teaching comprised a decade during the 1930's in geology and geophysics at Columbia University; Professor of Geology and Geophysics (part time) from 1962-1968 at Stanford University; a Regents' Professorship during the Spring Quarter, 1973, at the University of California, Berkeley; and numerous shorter lectureships at various universities, including California Institute of Technology, Massachusetts Institute of Technology, Scripps Institution of Oceanography, and the University of California, Los Angeles.
My scientific and professional affiliations include membership in the National Academy of Sciences (elected in 1955); American Academy of Arts and Sciences (1956); Geological Society of America (former President; Day medal for geophysics; Penrose Medal for general geology); American Geophysical Union; American Association of Petroleum Geologists (Associate Editor; Honorary membership) Society of Exploration Geophysicists (former Editor; Honorary membership) American Institute of Mining, Metallurgical and Petroleum Engineers (Lucas Medal for petroleum engineering): and Canadian Society of Petroleum Geologists (Honorary membership).
Of particular pertinence to the present hearings on the rate of industrial growth has been a continuing study, begun in 1926, of mineral and energy resources and their significance in the evolution of the world's present technological civilization. Of the more than a dozen published papers resulting from this study, the following bear directly upon some of the concerns of the present hearings:
- Hubbert, M. King, 1950, Energy from fossil fuels: American Association for the Advancement of Science, Centennial, Washington, D.C., p. 171-177.
- Hubbert, K. King, 1962, Energy resources--A report to the Committee on Natural Resources: National Academy of Sciences-National Research Council, Washington, D.C., Publication 1000-D, 141 p. Reprinted, 1973, National Technical Information Service, U.S. Department of Commerce, Springfield, Virginia 22151; available as PB 222401.
- Hubbert, M. King, 1969, Energy resources, in Resources and Man; National Academy of Sciences-National Research Council, Report of Committee on Resources and Man: San Francisco, W. H. Freeman & Co., p. 157-242.
- Hubbert, M. King, 1972, Man's conquest of energy: Its ecological and human consequences, in the environmental and ecological forum 1970-1971: U.S. Atomic Energy Commission, Office of Information Services, p. 1-50; available as TID 25857 from National Technical Information Service, U.S. Department of Commerce, Springfield, Virginia 22151.
It is my understanding that the present hearings pertain primarily to the bill H.R. 11343, ``A bill to provide for the establishment of a comprehensive energy conservation program in order to regulate the national rate of growth of energy use, to establish a Council on Energy Policy, and for other purposes.'' In Sec. 7(a) of this bill it is stipulated that one of the duties of such a Council shall be ``to develop and transmit to the President and to the Congress ... a comprehensive report setting forth the proposed legislation it deems necessary to achieve a maximum rate of growth in energy consumption of 2 per centum per year'' [Italics added].
Instead of discussing the merits or demerits of this proposed legislation, I think that it may be more helpful if I discuss some of the aspects of growth in general in an effort to see the bearing which these relationships may have upon our evolving social system.
The earth and its biological inhabitants comprise an evolving system in which various of its components change in magnitude with time. To describe these changes we may use the term ``growth'' in a generic sense as being synonymous with change. Thus a given quantity may be said to exhibit positive growth if its magnitude increases with time, negative growth if it decreases with time, and zero growth if it remains constant.
Two terms applicable to an evolving system are of fundamental importance. These are steady (or stationary) state and transient state. A system is said to be in a steady state when its various components either do not change with time, or else vary cyclically with the repetitive cycles not changing with time. A system in a transient state is one whose various components are undergoing noncyclical changes in magnitude, either of increase or decrease.
In distinguishing these two states the time scale needs also to be taken into account. Actually, an ideal steady state on the earth is impossible. For example, a pendulum clock driven by a weight or a spring is an almost perfect example of a cyclical steady state, with one exception: the weight falls or the spring unwinds. This latter characteristic is a transient phenomenon. Similarly on the earth many quantities vary cyclically on a diurnal or annual scale and yet change very slowly over periods of thousands of years. However, even these quantities which approximate a steady state over intermediate periods of time become transient phenomena on a longer time scale. On a time scale of the solar system even the sun's radiation is a transient phenomenon due to the fact that the sun is slowly exhausting the supply of hydrogen upon which its radiation of energy depends.
The growth phenomena with which we are at present concerned are almost exclusively of the transient kind. Three types of transient growth are illustrated in Figure 1. This figure is drawn with a time base extending from the year 1800 to beyond 2100 during which some quantity is assumed to grow in one or the other of the three modes shown. The first of these growth modes, shown by Curve I is uniform exponential growth. In this curve the magnitude of the growing quantity is assumed to double every 20 years. The equation for this type of growth is
Q = QO eat (1)
where Q0 is the magnitude of the quantity at initial or zero time, Q its magnitude at time t, a the fraction by which the quantity increases per unit time, and e=2.718 is the base of natural logarithms.
This equation can also be expressed in terms of successive doublings by
Q = Q02t/T = Q02n (2)
where T is the doubling period and n=t/T is the number of times the quantity has doubled in the time t. The relation between the doubling period T and the growth rate a is obtained from equation (1) by transposing Q0 to the left side and noting that for Q=2Q0
Q/Q0 = 2 = eaT (3)
Then taking the natural logarithm of both sides, we obtain
a = ln2/T = 0.693/T (4)
According to equation 4 a quantity which grows at such a rate as to double every 20 years would have a growth rate a per year of 0.0346, or 3.46 percent. By equation 5, a quantity which increases at a rate of 0.0693, or 6.93 percent per year would double every 10 years.
Another fundamental property of uniform exponential growth is the following. If the logarithm of the quantity is plotted graphically as a function of time, or if the quantity is plotted on semilogarithmic paper, the resulting graph will be a straight line whose slope is proportional to the growth rate. Conversely, a straight-line graph of the growth of a quantity, when plotted on semilogarithmic paper, indicates a uniform exponential growth.
A second type of growth is that shown in Curve II of Figure 1. Here the growing quantity increases exponentially for a while during its initial stage, after which the growth rate starts to slow down until the magnitude of the quantity finally levels off to some fixed maximum quantity. After this the growth rate becomes zero, and the quantity attains a steady state.
Examples of this kind of growth are afforded by biological populations and by the development of water power in a given region.
The population of any biologic species, if initially stationary, will respond to changed conditions in a manner indicated by Curve II, or conversely by its negative analog. That is, the population in response to a disturbance will either increase exponentially and then level off to a stable maximum, or else decrease negative-exponentially and finally stabilize at a lower level, or perish.
The development of water power in a given region behaves in a similar manner. The curve of installed capacity finally levels off and stabilizes at a maximum compatible with the potential water power afforded by the streams of the region.
A third type of transient growth is that represented by Curve III in Figure 1. Here, the quantity grows exponentially for a while. Then the growth rate diminishes until the quantity reaches one or more maxima, and then undergoes a negative-exponential decline back to zero. This is the type of growth curve that must be followed in the exploitation of any exhaustible resource such as coal or oil, or deposits of metallic ores.
Transition From Steady State
To Transient State Due To Fossil Fuels
By about 2 million years ago biological evolution had advanced to where the ancestors of the present human species had begun to walk upright and to use crude stone tools.
At that stage this species must have existed as a member of an ecological complex and competed with the other members of the complex for a share of the local solar energy essential for its existence.
The energy utilizable was almost exclusively the food supply derived by the biological system from solar energy by the mechanism of photosynthesis.
During the subsequent million or more years the human species progressively devised means of capturing an ever larger supply of the available energy.
This resulted in a slow change in the ecological relations and to an increase in density and geographical spread of the human population, but the energy per capita changed very little. In view of the slowness with which these developments must have occurred, the whole ecological system of which the human species was a member can only be regarded as comprising a slowly changing ecological steady state.
Although the pace quickened about 8,000 to 10,000 years ago with the domestication of plants and animals, a rapidly changing transient state of evolution was not possible until the large supplies of energy stored in the fossil fuels began to be utilized -when the mining of coal as a continuous enterprise was begun near Newcastle in northeast England about 9 centuries ago. This was followed as recently as 1857 in Romania and in 1859 in the United States by the exploitation of the second major source of fossil-fuel energy, petroleum.
In the case of coal mining, although scattered statistics are available during the earlier centuries, continuous annual statistics of world production are difficult to assemble earlier than 1860.
In the semilogarithmic plotting of Figure 3, three separate periods of exponential growth in coal mining are shown. The first and principal phase extends from 1860 to World War I. During this period production increased at a rate of about 4.4 percent per year with a doubling period of 16 years. During the second period from World War I to World War II the growth rate dropped only 0.75 percent per year. Then following World War II, an intermediate rate of 3.6 percent per year ensued.
The corresponding growth of the world production of crude oil is shown in Figures 4 and 5. As the semilogarithmic graph of Figure 5 shows, during the first 20 years crude-oil production increased at a higher rate than later. After about 1880 the annual production settled down to a nearly uniform exponential growth, averaging about 6.94 percent per year with a doubling period of 10.0 years. By 1970 the cumulative production amounted to 233 × 109 barrels. Of this, one half has been produced since 1960.
Coal production in the United States is shown on a semilogarithmic graph in Figure 6. In this case, the uniform exponential-growth phase persist from 1850 to 1907, with an average growth rate of 6.6 percent per year and a doubling period of 10.5 years. The corresponding growth in the annual production of crude oil in the United States, exclusive of Alaska, is shown in Figure 7. As in the case of world production, the growth rate initially was somewhat higher than that later. After 1875 annual production increased at a uniform exponential rate of 8.3 percent per year with a doubling period of 8.4 years until the beginning of the Depression following 1929.
The relation between the curve of the complete cycle of exploitation (similar to Curve III in Figure I) and the cumulative production is shown in Figure 8. Mathematically, when the production rate as a function of time is plotted arithmetically, the area beneath the curve becomes it graphical measure of the cumulative production. For the complete cycle of production, the curve must begin at zero and, after reaching one or more maxima, it must decline to zero for whatever estimate must be made from geological or other information of the ultimate quantity, Q, to be produced, the complete-cycle curve must be drawn in such a manner that the subtended area does not exceed that corresponding to the estimate.
Utilizing this principle, curves for the complete cycles of coal production for the world and for the United States are shown in Figures 9 and 10. In each ease the upper curve corresponds to an estimate of recoverable coal made by Averitt of the U.S. Geological Survey. For the world Averitt estimated the initial quantity of recoverable coal assuming 50 percent recovery of coal in place, amounts to 7.6 × 1012 metric tons, and for the United States 1.5 × 1012 metric tons.
These figures, however, include coal in beds as thin as 14 inches and to depths of 3000 feet or more. Since coal beds of such depths and thinness are not very practical sources for mining, actual minable coal may be considerably less than Averitt's maximum figures. This fact is indicated by the lower curves in each of Figures 9 and 10, based upon figures about half those by Averitt.
The significant fact about the complete-cycle curves of coal production in Figures 9 and 10 is that if only 2 or 3 more doublings occur in the rates of production, the peak production rates will probably occur not later than about 150 years from now. Another significant quantity displayed by these curves is the time required to produce the middle 80 percent of the ultimate cumulative production.
To produce the first 10 percent of the world's ultimate amount of coal will require the 1000 year period to about the year 2000. The last 10 percent may require another 1000 years during the declining stage. The time required to produce the middle 80 percent will probably not be longer than about 3 centuries extending roughly from the year 2000 to 2300. If the peak rate should be higher, or the quantity to be produced less than are shown in Figure 9, this period could be shortened to possibly 2 centuries or less.
Complete cycles for crude-oil production in the United States and in the world, respectively, are shown in Figures 11 and 12. For the United States, exclusive of Alaska, several lines of evidence reviewed in detail in the papers cited heretofore indicate that the ultimate quantity, Q, of crude oil to be produced will be about 170 billion barrels. The complete-cycle curve is based on that figure. For the world, the two curves shown in Figure 12 are based on a low estimate of 1350 and a high estimate of 2100 billion barrels.
What is most strikingly shown by these complete-cycle curves is the brevity of the period during which petroleum can serve as a major source of energy. The peak in the production rate for the United States has already occurred three years ago in 1970. The peak in the production rate for the world based upon the high estimate of 2100 billion barrels, will occur about the year 2000. For the United States, the time required to produce the middle 80 percent of the 170 billion barrels will be approximately the 67-year period from about 1932-1999. For the world, the period required to produce the middle 80 percent of the estimated 2100 billion barrels will be about 64 years from 1968 to 2032. Hence, a child born in the mid-1930s if he lives a normal life expectancy, will see the United States consume most of its oil during his lifetime. Similarly, a child born within the last 5 years will see the world consume most of its oil during his lifetime.
A better appreciation of the epoch of the fossil fuels in human history can be obtained if the complete production cycle for all the fossil fuels combined -- coal, oil, natural gas, tar sands, and oil shales--is plotted on a time span of human history extending from 5000 years in the past to 5000 years in the future, a period well within the prospective span of human history. Such a plotting is shown in Figure 13. This Washington Monument-like spike, with a middle 80-percent span of about three centuries, represents the entire epoch. On such a time scale, it is seen that the epoch of the fossil fuel can be but an ephemeral and transitory event-an event, nonetheless, that has exercised the most drastic influence so far experienced by the human species during Its entire biological existence.
Other Sources of Energy
It is not the object of the present discussion to review the world's energy resources.
Therefore, let us state summarily that of the other sources of energy of a magnitude suitable for large-scale industrial uses, water power, tidal power, and geothermal power are very useful in special cases but do not have a sufficient magnitude to supplant the fossil fuels. Nuclear power based on fission is potentially larger than the fossil fuels, but it also represents the most hazardous industrial operation in terms of potential catastrophic effects that has ever been undertaken in human history.
For a source of energy of even larger magnitude and without the hazardous characteristics of nuclear power, we are left with solar radiation. In magnitude, the solar radiation reaching the earth's surface amounts to about 120,000 × 1012 watts, which is equivalent, thermally, to the energy inputs to 40 million 1000-megawatt power plants. Suffice it to say that only now has serious technological attention begun to be directed to this potential source of industrial power. However, utilizing principally technology already in existence there is promise that eventually solar energy alone could easily supply all of the power requirements for the world's human population.
Constraints on Growth
Returning now to the problem of sustained growth, it would appear that with an adequate development of solar power it should be possible to continue the rates of growth of the last century for a considerable time into the future. However, with regard to this optimistic view attention needs to be directed to other constraints than the magnitude of the energy supply. These constraints may be broadly classified as being ecological in nature.
For more than a century it has been known in biology that if any biological species from microbes to elephants is given a favorable environment, its population will begin to increase at an exponential rate. However, it was also soon established that such a growth rate cannot long continue before retarding influences set in. These are commonly of the nature of crowding, pollution, food supply, and in an open system by adjustments with respect to other members of the ecological complex.
In our earlier review of the rates of production of the fossil fuels it was observed that for close to a century in each case the production increased exponentially with doubling periods within the range of 8 to 16 years. The same type of growth rates are characteristic of most other industrial components. Figure 14 is a graph showing the exponential growth of the world electric generating capacity. The solid part of the curve since 1955 shows a growth rate of 8.0 percent per year with a doubling period of 8.7 years. The dashed part of the curve shows approximately the growth since 1900. In the United States during the last several decades electric power capacity has been doubling about every 10 years. The world population of automobiles and also passenger miles of scheduled air flights are each also doubling about every 10 years.
In Figure 15 a graph is shown of the growth of the world's human population from the year 1000 A.D. to the present, and an approximate projection to the year 2000. This is important in that it shows the ecological disturbance of the human population produced by the development of technology based upon the fossil fuels, the concomitant developments in biological and medical science, and expansion into the sparsely settled areas of the newly discovered geographical territories. Note the very slow rate of growth in the human population during the 500 year period from the year 1000 A.D. to 1500, and then the accelerated growth that has occurred subsequently. Were it possible to plot this curve backward in time for a million years, the curve would be barely above zero for that entire period. The flare up that has occurred since the year 15M is a unique event in human biological history.
It is also informative to contrast the present growth rate of the human population with the average that must have prevailed during the past. The present world population is about 3.9 billion which is increasing at a rate of about 2 percent per year, with a doubling period of about 35 years. What could have been the minimum average doubling period during the last million years?
This minimum would occur if we make a wholly unrealistic assumption, namely that the population a million years ago was the biological minimum of 2. How many doublings of this original couple would be required to reach the world's present population of 3.9 billion? Slightly less than 31. Hence, the maximum number of times the population could have doubled during the last million years would have been 31. The minimum value of the average period of doubling must accordingly have been 1,000,000/31, or 32,000 years.
To be sure the population need not have grown smoothly. Fluctuations no doubt must have occurred due to plagues, climatic changes, and wars, but there is no gainsaying the conclusion that the rate of growth until recently must have been so extremely slow that we may regard the human population during most of its history as approximating an ecological steady state.
The same kind of reasoning may be applied to the other components of any ecological system. It is known from geological evidence that organic species commonly persist for millions of years.
Consequently, when we compute a maximum average growth rate between two finite levels of population at a time interval of a million years, we arrive at the same conclusion, namely that the normal state that is the state that persists most of the time is one of an approximate steady state.
The abnormal state of an ecological system is a rapidly changing transient or disturbed state. Figure 16 illustrates the behavior of the populations of three separate species of an ecological complex during a transient disturbance between two steady states. In such a disturbance all populations are effected, some favorably, some unfavorably.
To obtain an idea of how long a disturbed or transient state can persist, a fundamental question that may be asked is: About how many doublings of any biological or industrial component can the earth itself tolerate? A clue to this may be obtained if we consider the problem of the grains of wheat and the chessboard. According to an ancient story from India, a king wished to reward one of his subjects for some meritorious deed. The man replied that his needs were few and he would be satisfied to receive a bit of wheat. If 1 grain were placed on the first square of a chessboard, 2 on the second, 4 on the third, and the number of grains were doubled for each successive square, he would be content to receive this amount of grain.
The king ordered the board to be brought in and the wheat counted out. To his consternation he found that there was not enough wheat in the kingdom. Recently I obtained some wheat, measured a small volume, counted the grains, and did some arithmetic to find out how much wheat really was involved. The results were the following: On the nth square of the board the number of grains would be 2n-1; for the 64th and last square the number of grains would be 263; and for the whole board the total number of grains would be twice that for the last square or 264 grains. This amount of wheat, it turned out, would be 2000 times the world's present annual wheat crop.
While this may appear to be a trivial problem, its implications are actually profound. The Earth itself cannot tolerate the doubling of 1 grain of wheat 64 times.
The same principles and the same kinds of constraints apply when we are dealing with successive doublings of any other biological or industrial component. Even if there were no shortages of energy or of materials the earth will not tolerate more than a few tens of doublings. For example, as was remarked earlier, the world population of automobiles is doubling about every 10 years.
Suppose we substitute automobiles for wheat grains in the chessboard problem. Take one American-size automobile and double it 64 times. Then stack the resultant number of cars uniformly over all the land areas of the earth. How deep a layer would be formed? One thousand miles deep.
Cultural Aspects of the Growth Problem
Without further elaboration, It is demonstrable that the exponential phase of the industrial growth which has dominated human activities during the last couple of centuries is drawing to a close. Some biological and industrial components must follow paths such as Curve II in Figure 1 and level off to a steady state; others must follow Curve III and decline ultimately to zero.
But it is physically and biologically impossible for any material or energy component to follow the exponential growth phase of Curve I for more than a few tens of doublings, and most of those possible doublings have occurred already.
Yet, during the last two centuries of unbroken industrial growth we have evolved what amounts to an exponential-growth culture. Our institutions, our legal system, our financial system, and our most cherished folkways and beliefs are all based upon the premise of continuing growth. Since physical and biological constraints make it impossible to continue such rates of growth indefinitely, it is inevitable that with the slowing down in the rates of physical growth cultural adjustments must be made.
One example of such a cultural difficulty is afforded by the fundamental difference between the properties of money and those of matter and energy upon which the operation of the physical world depends. Money, being a system of accounting, is, in effect, paper and so is not constrained by the laws within which material and energy systems must operate. In fact money grows exponentially by the rule of compound interest. If M0 be a national monetary stock at an initial time, and ithe mean value of the interest rate, then at a later time t the sum of money Mo will have grown exponentially to a larger sum M given by the equation
Next consider the rate of physical production. Let Q be the generalized output of the industrial system at the initial time, and a be the rate of industrial growth. The industrial production at time t will then be given by
At any given time the ratio of a sum of money to what the money will buy is a generalized price level, P. Hence
which, when substituted into equations 6 and 7, gives
P=M/Q = M0eit / Q0eat = (M0/Q0) e(a-i)t
However, M0/Q0 = P0, the price level at the initial time. Therefore,
P = P0e(a-i)t
which states that the generalized price level should increase exponentially at a rate equal to the difference between the rate of growth of money and that of industrial production. In particular, if the industrial growth rate a and the average interest rate i have the same values, then the ratio of money to what money will buy will remain constant and a stable price level should prevail. Suppose, however, that for physical reasons the industrial growth rate a declines but the interest rate i holds steady. We should then have a situation where i is greater than a with the corresponding price inflation at the rate (i-a). Finally, consider a physical growth rate a=0, with the interest rate i greater than zero. In this case, the rate of price inflation should be the same as the average interest rate. Conversely, if prices are to remain stable at reduced rates of industrial growth this would require that the average interest rate should be reduced by the same amount. Finally, the maintenance of a constant price level in a nongrowing industrial system implies either an interest rate of zero or continuous inflation.
As a check on the validity of these deductions, consider the curves of U.S. energy and pig-iron production shown in Figures 17 and 18. Because energy is a common factor in all industrial operation and pig-iron production one of the basic components of heavy industry, the growth in the production of energy and pig Iron is a very good indicator of the total industrial production.
Figure 17 Is a graph plotted on a semilogarithmic scale of the production of energy from coal, oil, gas, and water power and a small amount of nuclear power from 1850 to 1969. From 1850 to 1907 the production of energy increased exponentially at a rate of 6.91 percent per year, with a doubling period of 10.0 years. Then during the three-year period from 1907 to 1910, the growth rate dropped abruptly to a mean rate of 1.77 percent per year and the doubling period increased to 39 years.
Figure 17 is a corresponding plot of U.S. pig-iron production. The pig-iron curve resembles that of energy so closely 'that the two curves can hardly be told from one another. Pig-iron production also grew exponentially at a rate close to 7 percent per year until about 1910, when it too broke abruptly to a lower rate of less than 2 percent per year. This abrupt break at about 1910 represents a major event in the industrial history of the United States, yet we have barely been aware that it happened.
In parallel with this industrial growth during most of the 19th century and continuing until 1929, the mean monetary interest rate was also about 7 percent per year. Therefore until 1910 the price level, except for temporary disturbances, should have remained comparatively stable. Following 1910, when the physical growth rate dropped to about 2 percent per year, whereas the interest rate remained at about 7 percent, a price inflation at a rate of about 5 percent per year should have begun. Despite fluctuations, the interest rate has remained consistently higher than the physical growth rate from 1910 to the present, which implies that we should have had an almost continuous price inflation for the last 64 years.
A graphical illustration of the relations between the monetary growth, physical growth, and price inflation is shown In Figure 19. The upper straight line represents the exponential growth of money at the interest rate i; the lower curve the physical growth at the lower rate a. The ratio of M to Q at any given time is proportional to the distance between those two curves. If the curves are parallel, the spacing is constant and a stable price level will prevail. If the curves are divergent to the right, the price level will increase at the rate (i-a).
These curves depict the approximate relation between the monetary growth rate and the physical growth rate that has prevailed in the United States since 1910.
Finally, as confirmatory evidence, there is shown in Figure 20 a graph of the consumer price index as computed for each year from 1800 to 1971 by the U.S. Bureau of Labor Statistics. The three principal distortions coincide with the War of 1812, the Civil War, and World War I.
Disregarding these, and drawing a smooth curve under the bases of each gives a very informative result. For the period from 1800 to 1910 the consumer price level remained remarkably stable. Beginning about 1910, at the time of the abrupt drop in the rate of industrial growth, prices began to inflate and they have continued to do so to the present time.
of Industrial and
The foregoing example has been discussed in detail because it serves as a case history of the type of cultural difficulties which may be anticipated during the transition period from a phase of exponential growth to a stable state. Since the tenets of our exponential-growth culture (such as a nonzero interest rate) are incompatible with a state of nongrowth, it is understandable that extraordinary efforts will be made to avoid a cessation of growth. Inexorable, however, physical and biological constraints must eventually prevail and appropriate cultural adjustments will have to be made.
Mr. UDALL. Thank you, sir.
We will try to take about 3 minutes for each member who wants to ask questions.
I have two quick ones. First is a comment, or it may be a question.
It is interesting to me that you distinguished physical scientists have arrived at the same conclusion, sort of, that Dr. Heilbroner, an economist, has arrived at. And that is that this inflation that we are all so concerned about now may not necessarily be mismanagement of the economy or some temporary problems necessarily, but maybe built into this whole problem of exponential growth in terms of the population and use of resources, and so on.
Is that what you are saying?
Dr. HUBBERT. It has been going on, the record is unequivocal, since 1910, disregarding the disturbance of World War I.
Mr. UDALL. My second question is, as one has been right when others were wrong in terms of the availability of petroleum, I understand from your statement here and other information that we peaked in U.S. oil production about 3 or 4 years ago, 1970 or 1971.
Dr. HUBBERT. 1970.
Mr. UDALL. Do you foresee, even with the best scenario, the most optimistic luck offshore, turning to oil shale, these kinds of things, do you think we will ever again exceed the rate of production, domestic production of oil from all sources that we had in 1970?
Dr. HUBBERT. I doubt it. The argument is made, wait until Alaska comes on stream, and all that. More than likely that will merely slow down the rate of decline. The amounts of oil that are postulated to be discovered off the Atlantic seaboard I am very, very dubious about. And so my best guess is, on the basis of the information at hand, that the peak of 1970 is the all time peak. And the other things that we would do would be merely to slowdown the rate of decline rather than to reverse it. I won't say it is impossible to reverse it, but I am very dubious that we can.
Mr. UDALL. The likelihood is that we will not.
Dr. HUBBERT. My guess is that it will not happen.
Mr. UDALL. I notice the figures that oil production in the United States last year was less than it was the year before, and that this trend, if it continues, would mean that by the time we get to the full 2 million barrels a day from Alaska, we will have lost 2 million in production from other U.S. sources.
Dr. HUBBERT. That is my best guess on the matter.
Mr. UDALL. Mr. Martin?
Mr. MARTIN. Thank you, Mr. Chairman.
Mr. Hubbert, this is a very important fundamental analysis of what has happened to cause changes in our growth rate.
I notice that one conclusion that you show in many of these graphs is the change in the rate of growth in production of both energy and minerals in about 1910. Then it seems to me you are saying as a necessary consequence of that is the increased rise in the cost of living and inflation since about 1910 also.
Is that reading you correctly?
Dr. HUBBERT. I am principally saying -- in the first place that the break of 1910 is, I think, a major event in American history, and we didn't even know it happened. We have been coasting along under the illusion that we had far more growth since 1910 than we had actually had. If you want to go back to the decade of the 1920's, that was regarded during the time as a period of a great boom. Well, actually industrially, although the industrial production in 1929 was the highest up until that date, it was still about 30 percent less than where it would have been if that break hadn't occurred in 1910.
So that the decade of the 1920's was a boom period on paper, not industrially. Industrially it was a slowing down period.
Mr. MARTIN. When you compare it on the logarithmic scale and show these different slopes?
Dr. HUBBERT. Yes, Sir.
Mr. MARTIN. I have no further questions, Mr. Chairman.
Mr. UDALL. Mr. Roncalio?
Mr. RONCALIO. I have deeply enjoyed this. I don't think I have grasped it all.
Will you state again, what happened in 1910?
Dr. HUBBERT. The growth of total energy, industrial energy of the United States, from coal, oil, gas, water-power, plotted on semi-logarithmic paper will plot a straight line if you have uniform exponential growth. That straight line continued until the period of about a 3-year interval, 1907 to 1910, and then it broke away to a lower line of less than 2 percent a year. The growth rate up until that time was about 7 percent, a year.
I have another curve showing the same thing in pig iron. Pig iron is the foundation of heavy industry in the United States other than energy. The same growth rate approximately occurred to 1910, and the same break occurred to less than 2 percent.
Mr. RONCALIO. That is on your figure 1?
Dr. HUBBERT. No, it is toward the end over there.
Mr. RONCALIO. Figure 17.
Dr. HUBBERT. Yes.
Mr. RONCALIO. Thank you very much. I would like to hear more some day.
Mr. UDALL. I think this has been a very useful hearing this morning. I thank you all who participated.
I thank you particularly, Dr. Hubbert.
The subcommittee will stand adjourned until Thursday at the regular time.
Whereupon, at 12:07 p.m., the subcommittee adjourned, to reconvene at 9:45 a.m., Thursday, June 6, 1974.
For more information investigate Technocracy Technate ideas. M. King Hubbert
Man-Hours and Distribution
M. King Hubbert • 1940
I: THEIR SOCIAL RELATIONSHIP
The period since 1929 has been one of the most unique and one of the most disturbing in the history of North America. The events that have occurred since the stock market crash of that year have provoked more competent social thinking on the part of the American people, and have demolished more fixed tenets of our American social and economic faith than those of any preceding half century.
Up until the year 1929 the American public had been brought up in the belief that any child with ambition and a willingness to work would automatically be rewarded with material gain in direct proportion to the effort and ingenuity displayed; that any office boy might become the president of his corporation in due time provided he displayed the proper virtues of industriousness, honesty, respectfulness and thrift; that every boy had an equal chance of becoming President some day; that the pathway to success was to be found in part through proper education, and that educational facilities were equally available to all; that work could be had by all who were willing; and, conversely, that unemployment and lack of material success were themselves indicative of the lack of those cardinal virtues of industriousness, thrift, honesty, and the like.
In 1929 and the years that have followed, these tenets of our American folk-lore have been rudely shattered, for during that time one-quarter to one-third of all those willing and able to work have found it impossible to obtain employment and have consequently been forced to depend upon their relatives and friends for support, or else upon public governmental relief. During those years as many as one-quarter of the entire population have been dependent upon the funds of the federal government for food and clothing. Even the most independent and rugged of our remaining individualists, the American farmer, has found it increasingly necessary to rely upon the funds of the federal government. Corporate business has likewise had to be bolstered up.
The People Watch
In addition to these experiences, the American public has watched both government and business indulge in the curtailment of food production and its wholesale destruction at a time of the greatest human need in American history. They have seen their factories closed at a time when a large fraction of the population has been in want of the products of industry and when millions have been willing and anxious to work. They have placed high hopes upon the promises of their political and business leaders only to observe that in practice the fulfillment of these promises has resulted in a virtual pauperization of almost one-third of the population, with a standard of relief just sufficient to maintain social quiescence. They have seen their industrial equipment constrained to operate at a level only slightly above the lower limit of social tolerance. At the same time they have seen the debts of the federal government increase from 17 to 40 billions of dollars, and those of the state and local governments by some billions more of so-called `emergency expenditures' without the slightest prospect of the emergency becoming anything but worse.
More recently, they have witnessed the maneuvers of their political leaders in the direction of international intrigue, the logical consequence of which is war, as a means of diverting attention from their demonstrated incompetence at solving their legitimate problems at home.
While the experiences of these last several years have been bewildering and in many instances tragic, it is impossible for the American public to have lived through them without learning and without beginning to ask some profound questions: If our industry and our raw materials are adequate for the production of abundance, why should there be poverty and scarcity? Why should our plants be shut down and our produce destroyed or, what is equivalent, shipped abroad? If this production can be affected by automatic machinery, why should men have to work, and if they do not need to work, why should they have to starve?
These are elemental questions that the American people are asking, first of themselves and then of their leaders in business and in government. Furthermore they are questions that demand an answer. So far, the only answer they have received from these sources has been one of the most determined and most costly propaganda campaigns in history, in which the United States Chamber of Commerce, the National Association of Manufacturers, the Machinery and Allied Products Institute, the Automobile Manufacturers Association, the American Iron and Steel Institute, the National Industrial Conference Board, banks and other financial institutions, the spokesmen for scientific and engineering societies, innumerable trade journals, the press, the radio, and the screen have all joined forces in defense of one variation or another of the proposition that 'Machines create jobs!'
A New Approach
As yet, the only organization on the North American Continent which has analyzed this problem correctly and faced its implications squarely is Technocracy, Inc. When the public was told that prosperity was just around the corner,' that we were, having merely another turn of the 'business cycle,' that technological unemployment was nonexistent and, in the nature of things, impossible, it was Technocracy that pointed out the correct nature of the situation.
The method of analysis employed by Technocracy, though long since tried and proven in other domains of phenomena, was still strange and unfamiliar in our last stronghold of ignorance and superstition--the domain of human social phenomena. That method was the method of physical science, the method that had conquered the power of the wind and the water, that had mined and refined the minerals of the earth, that had harnessed electricity, unlocked the secrets of the atom, subdued disease, and which now at last was being employed to investigate and solve the problems of human society.
Like all witch doctors who feel their power slipping, our molders of public opinion have not taken this intrusion lightly. Most of the aforementioned propaganda has been offered in direct refutation of statements first made public by Technocracy in 1932. Yet the subsequent events--the only proof known to science--have consistently borne out the validity and accuracy of that analysis, much to the confusion of its critics.
Since, however, the method of that analysis, the method whereby social phenomena may be examined in the light of physical science, may not heretofore have been made sufficiently clear, it is proposed to treat in some detail one of the more pressing of our contemporary problems-that of technological unemployment-and certain other problems contingent thereto.
II: THE DECLINE OF MAN-HOURS
In any given field of production whether of goods or of services, there is a relationship between:
- the number of units produced in a given time,
- the number of man-hours of human effort required to produce a single unit,
- the number of hours worked per man in that time,
- the number of men employed.
In any given field of production let:
be the number of units produced per year,
be the number of man-hours required to produce one unit,
be the number of man-hours per year per man,
be the number of men engaged,
be the total number of man-hours required for the entire production.
A man-hour is defined as one man working one hour, regardless of the occupation.
From the above definitions the following relationships are obtained:
The total man-hours per year for the entire production are the product of the man-hours per unit and the total number of units produced in a year,
Also the total number of man-hours per year is equal to the total employees multiplied by the average hours per employee per year. Thus,
Equating (1) and (2) together,
nl=mq or n=(mq)/l (3)
Thus we see that the total number of employees at any time in a given industry is directly proportional to the man-hours per unit and to the rate of production, and is inversely proportional to the number of hours worked by each employee.
If at a given time mq is some finite amount, the number of employees, n, may be made as large as one wishes provided the working hours, l, be made short enough.
Variation of Production, Total Man-Hours and Man-Hours per Unit, with Time
In general, in any given industry, production, man-hours per unit produced, and total man-hours do not remain fixed but undergo changes with time. If the total production, q, and the man-hours per unit, m, are considered to vary independently, the total man-hours, e, are uniquely determined by equation (1), e=mq, at any given time. the amount of work available is determined by total production and by the human time required to produce each unit.
Growth of Production with Time
Every physical quantity that changes with time does so under very definite physical limitations. Industrial production, being, a physical process, therefore proceeds under ordinary physical limitations. One of the most common types of physical growth is that in which a quantity increases by a fixed percentage of itself in equal time intervals. This is exactly equivalent to the increase in the principal of a sum of money at compound interest, where the interest is compounded continuously rather than per year. We shall speak of this as being a compound-interest type of growth.
Practically all industrial. production in its earlier stages increases with a compound-interest type of growth. From the Civil War to the World War, American industrial growth was at such a rate as to double itself once about every twelve years. This would correspond to an instantaneous rate of increase of about 6 percent per annum.
One of the basic principles of any such growth is that it is physically impossible for it to continue more than temporarily, for otherwise it would soon reach such proportions as to require more materials than exist in the entire earth. It also would outrun the capacity of the public to consume.
It follows, therefore, that the next stage of physical growth must be one of leveling off. The leveled-off stage may continue, or else be followed by a declining stage in which the quantity may become stabilized at a lower level than its maximum, or else continue to decline to zero.
The point at which the transition from the first stage of growth (that where the increase each year is greater than that of the year before) to the second stage, where the growth is definitely slowing down and the curve is leveling off, is called the point of inflection of the curve.
The point of inflection in the industrial growth of The United States occurred at about 1915, and from that time on to the present the growth of industry as a whole has been gradually leveling off. While it is physically possible to step industrial activity up to a level considerably beyond that of 1929, the time required to do so would not be long, and thereafter it would level off again. Hence it follows that from now on, the most important characteristic of the growth of American industry will be the dominance of leveling off over expansion.
The foregoing remarks are equally applicable to population growth. From 1790 till the Civil War the population of the United States expanded at about 3 percent per annum. By 1920 that rate had decreased to about 1.5 percent, and by 1936 to about 0.5 percent. According to present estimates the population of the United States will reach a maximum of about 135 million around the year 1950 and will thereafter possibly decline somewhat.
Variation of Man-Hours per Unit with Time
The man-hours required to produce a single unit of any given commodity or service vary with time in a manner quite contrary to that of the growth of production. The man-hours per unit are a function of the technology involved. It is an axiom in all machine design that every time a new machine is designed to do a kind of work formerly done by another machine or by handicraft, the new machine will in general run faster, weigh less per unit rate of output, and require fewer man-hours per unit than that used previously. Thus for the same kind of production the man-hour-per-unit curve, with rare exceptions, always declines.
In American industry the man-hour-per-unit curve has been declining spectacularly in the past. A knowledge of present technology indicates that if industry is only brought up to its own current best practice, the man-hour-per-unit curve will descend even more spectacularly in the future.
EMPLOYMENT IN CLASS I RAILROADS---------------------------------------------------- Number of Total Hours per Employees Man-Hours Man per YearYear n e l----------------------------------------------------1916 1,599,153 4,957,654,532 3100.21918 1,841,575 5,701,417,385 3095.91920 2,022,832 5,446,740,533 2692.61929 1,660,850 4,346,921,546 2617.21937 1,114,663 2,799,539,000 2511.6----------------------------------------------------
These two long-time curves-the growth of production, q, and the decline of man-hours per unit, m, are shown in a hypothetical case which is plotted graphically in Figure 1. In this case the production curve, q, is taken from the total energy consumed in the United States, and hence reflects approximately the whole production of the United States for the period from about the Civil War to the present.
The curve of man-hours per unit, m, used in this hypothetical case is derived from the man-hours per unit in the manufacturing industry. Both of these curves represent approximately what has been taking place in the United States during the past three-quarters of a century. The curve of total man-hours, e, is a computed curve. The total man- hours for each year is given by equation (1) where e=mq for that year.
It will be noted that in spite of the increase of production, q, the decline of man-hours per unit, m, has been such that the product e=mq (total man-hours) reaches an absolute peak and thereafter declines. It cannot be emphasized too strongly that this is an event that does not repeat itself. In any given long-time growth period this has to happen, and it only happens once.
Examples of Decline Man-Hours
This maximum of total man-hours has occurred at different times in different industries. In our biggest single industry, agriculture, the all-time peak of employment, according to the U. S. Census, occurred about 1910. Agricultural production, however, continued to increase almost up till the present.
Complete data on railroads are given by the Interstate Commerce Commission report, Statistics of Railways in the United States, 1930. On page S-9 of this report is a table of average number of employees, n, total man-hours, e, and the number of man-hours per man per year, l, for the Class I railroads of the United States for every year from 1916 to 1930 inclusive. The essential points of this table are reproduced in Table 1.
The intermediate years are not quoted since they show values between those given. Only the data for the principal parts of the curves are quoted. The complete curves are given in Figure 2. The total man-hours in Class I railroads reached an all-time peak of over 5.701 billion in the year 1918. By 1929 this had declined To 4.347 billion man-hours. (By 1937 this had declined to 2.799 billion man-hours.) The total employees reached an all-time peak in 1920 Of 2,022,832. By 1929 this had declined to 1,660,850. (By 1937 this had declined to 1,114,663.) In the meantime the number of hours worked per employee per year declined more or less steadily from 3,100.2 in 1916 to 2,617.2 in 1929, (and to 2,511.6 in 1937). Railroad haulage, however, both in ton-miles and car-miles reached an all-time peak in 1929 (Statistical Abstract of the U. S.).
PRODUCTION AND EMPLOYMENT IN THE ELECTRIC LAMP INDUSTRY------------------------------------------------------------------- Production Hours per Total Man-Hours (millions of Man per Man-Hours per Lamp lamps) Employees Year (millions)Year q n l e=nl m=e/q-------------------------------------------------------------------1920 362.1 17,293 2,091 36.145 9.98 x 10-21921 242.6 10,929 1,986 21.710 8.95 X 10-21922 311.2 12,124 2,025 24.549 7.89 x 10-21923 404.2 12,933 2,090 26.821 6.64 X 10-21924 435.2 10,213 2,162 22.079 5.07 x 10-21925 459.3 9,062 2,180 19.753 4.30 x 10-21926 482.4 8,290 2,120 17.576 3.64 x 10-21927 544.6 8,099 2,213 17.922 3.29 x 10-21928 557.0 7,253 2,203 15.976 2.87 x 10-21929 644.0 7,259 2,205 16.003 2.49 x 10-21930 553.2 6,460 2,097 13.424 2.43 x 10-21931 503.3 5,317 1,968 11.443 2.27 x 10-2-------------------------------------------------------------------(U.S. B. L. S., Bull. 593)
Table II contains the complete data on production and employment in the assembly plants of the electric lamp industry for the years from 1920 to 1931 inclusive, as given by the U. S. Bureau of Labor Statistics, Bulletin No. 593. It will be noted that in this industry the employees, n, declined from 17,283 in 1920 to 5,817 in 1931. This means that the all-time peak of employment must have occurred at or prior to 1920. The production, q, meanwhile rose from 362,100,000 in 1920 to 503,300,000 in 1931. The man-hours per lamp, m, declined steadily throughout the period, from 0.0998 man-hours per lamp in 1920 to 0.0227 in 1931, a drop Of 77.2 percent.
All Manufacturing Industries
Fairly complete data have been obtained on the whole manufacturing industries of the United States from the U. S. Census of Manufacturing and the Statistical Abstracts of the U. S. for the census years from 1899 to 1929. Approximate figures have been obtained for manufacturing since 1929 from various sources-principally the U. S. Bureau of Labor Statistics. What was sought in this instance were curves of total production, q, total wage earners, n, man-hours per unit produced, m, total man-hours, e, and the man-hours per man per year, l.
Some of these quantities, notably the production, q, had to be obtained indirectly from the data given by the Census. There is no fixed unit by which the production of miscellaneous articles may be measured, so the production figures must represent a composite of all manufacturing industries. There are several ways of arriving at an estimate of q. One is by the installed horsepower of prime movers in the manufacturing plant. If it be assumed that the load factor has not been declining, then the production will increase as fast as, or faster than, the increase in installed horsepower of prime movers.
Another method of obtaining an estimate is by the growth curve of total energy. Since energy is used in driving all industrial equipment, and since the output per unit of energy is constantly increasing with time, it is conservative to assume that manufacturing production has increased at least as fast as the increase in the use of enemy. Another approach is a monetary one. Let v equal the value of a given quantity, q, of products, and p their price per unit. Then,
If the total value of all manufactured products is known and a wholesale price index is available, a relative value of q for succeeding years may be obtained.
A Long-Term Trend
In the case of the manufacturing industries all of the above methods give substantially the same results, namely, that from 1899 to 1920 the production, q, increased by a factor of from 3-5 to 4.0. The last named method was used merely because it happened to be most convenient.
The length of the working week, lw, has been taken from the study entitled Machinery, Employment and Purchasing Power by the National Industrial Conference Board, and represents the average number of hours actually worked as computed from payroll figures, instead of the nominal length of the working week. All other figures were either obtained directly or were computed by means of the foregoing equations from data given. These are given in Table III and shown graphically in Figure 3.
ALL MANUFACTURING INDUSTRIES, U. S.
Here, as before, the production, q, mounted steadily to an all-time peak in 1929. The man-hours per unit in the meantime declined steadily from 1889 to the present. The total man-hours, which is the product of the man-hours per unit and the number of units produced, reached an all-time peak in the year 1919, and has been fluctuatingly declining ever since. In spite of the continued shortening of the hours of labor and the increase in production, it is significant to note that the all-time peak in the number of wage earners employed in the manufacturing industries was also reached in the year 1919.
Complete data on cigarette production and employment are given in Production, Employment and Productivity in 59 Manufacturing Industries, WPA National Research Project. The curves for this industry are given in Figure 4, and the figures for specific years are given in Table IV. (See also photographs on inside rear cover.)
While the foregoing are only specific instances, they happen to embrace the major part of the industrial activity of the United States and afford ample verification of the theoretical considerations set forth earlier in this paper. Since the same type of processes are occurring in every field of endeavor (witness the high-speed accounting machinery of the International Business Machine Corporation, for instance), it follows that the processes given somewhat in detail for some of our major industries must also be true of others for which complete data have not been obtained.
This latter conclusion is supported by the fact that, while production is estimated by the U. S. Bureau of Labor Statistics to have risen from 62 percent of 1929 in 1932 to somewhat more than 80 percent by early 1936, the unemployment, which is estimated to have been 14,520,000 in March, 1933, was still approximately 12,000,000 in early 1936 (U. S. Bur. Lab. Stat.) in spite of a reduction from a 48- to a 39- hour week in the meantime. (The number of new employables is increasing meanwhile at the rate of about 600,000 per year.)
Since labor-saving devices are certainly going to continue to be installed in the future with a consequent continued decline in the man-hours per unit of production, and since production itself can only be increased temporarily before leveling off again, it follows that the curve of total man-hours will, with only temporary reversals, be characterized by a continuous decline into the indefinite future.
EMPLOYMENT AND PRODUCTION IN CIGARETTESProduction of Man-Hours Cigarettes in Cigarettes perYear per year Units Man-Hour------------------------------------------------------1920 43,129,391 47,459,000,000 9861922 37,251,423 55,790,000,000 1,4971924 35,074,578 72,725,000,000 2,0731926 33,336,230 92,110,000,000 2,7631929 40,958,055 108,716,000,000 2,6541930 33,924,891 123,810.000.000 3,6491932 27,358,379 106,936,000,000 3,8982934 36,391,393 130,065,000,000 3,5771936 32,370,076 153,896,000,000 4,909------------------------------------------------------
That this need not necessarily imply unemployment may be seen when one recalls from equation (3) that the number employed is
If I be made short enough any number, n, may be given employment, and there need be no unemployment whatsoever. It might be remarked that a four-hour day is not at all to be unexpected in the near future. For the present, with production at 1929 levels, a day of somewhat longer than this would suffice to re-employ those now out of work.
America Faces a New Problem
It cannot be emphasized too strongly that the trends we are describing are long-time trends and were thoroughly evident prior to 1929. These trends are in nowise the result of the present depression, nor are they the result of the World War. On the contrary, the present depression is a collapse resulting from these long-term trends.
It is further to be emphasized that there is nothing in any of these trends corresponding to the economists' concept of a `business cycle.' The steady growth of population and the steady decline of man-hours per unit are both non-cyclical phenomena, and they do not repeat themselves. Neither has the mean growth of production exhibited any repetitions, nor has the curve of total man-hours, other than by minor zigzag oscillations. It rose steadily to a maximum and then steadily declined. We would like to emphasize that this ensemble of events has only occurred once in American history and, furthermore, it is absolutely certain that it will never occur again. Consequently all interpretations of the present situation as merely a recurrence of a situation that has been happening at intervals in the past, are basically fallacious and worthy of no serious consideration.
III: DISTRIBUTION UNDER A PRICE SYSTEM
The Factor of Ownership
In the light of the foregoing discussion the answer seems simple and obvious. If it is possible to completely eliminate unemployment by a suitable reduction of the hours of labor per person, why not make the reduction and be done with it?
This would be simple enough were it not for the monetary aspects of the problem. Therein lies the difficulty. As it happens, all of our social and industrial operations are conducted in accordance with the rules of the game of the Price System. According to these rules, everything of value must be owned either by individuals or by corporations. Distribution is then accomplished by the mechanism of trade wherein owners exchange property rights over goods and services.
In the pioneer days it was customary for the great majority of our citizens to be property owners, and most of our industrial production at that time came from small, individually owned, industrial establishments. As our industry has grown there has been a corresponding metamorphosis in its ownership. Large units have proven more efficient and have progressively displaced small units. In the process the individual owner has been liquidated and his place taken by the corporation. The ownership and control of corporations has been pyramided more and more into the hands of a minute fraction of our total population.
With this growth of industrialization there has been an increased urbanization of the population until in 1938 out of 130 million people in the United States only 32 million lived on the farms, and all, even the farmers, were directly dependent upon the products of industry.
With the pyramiding of the ownership of the means of production into a small number of hands, there has resulted a large and ever-increasing fraction of the population whose ownership of property, aside from personal effects, is sensibly zero, yet these people, in order to live, must be able to acquire the products of industry-food, clothing, housing, transportation, and the like. Since it is a Price System rule that these things can only be acquired by trade, and since all that these people have to offer is their personal service-their man-hours then it follows that the consuming power of the great bulk of our population is directly geared to the income that can be acquired from the marketing of man-hours of labor.
Another fundamental rule of all Price System exchange is that the value of a thing, that is the amount of another commodity or of money that is exchangeable for it, varies with its scarcity. Air, for example, has no value because it is abundant and no way has yet been found to render it scarce. Water has value only in regions where it is scarce. The values of farm products are highest following droughts or other forms of crop curtailment.
The same is true of all exchange on a value basis; it is the fundamental rule of a Price System. In fact a Price System is defined as any social system whatever which effects its distribution of goods and services on the basis of commodity evaluation. When goods are scarce, values and prices are high; when goods become abundant, values decline, approaching the limit zero as the abundance approaches the saturation of the physical ability to consume.
Now, it has already been indicated that the great majority of our population have nothing to sell except themselves, or their man-hours. Man-hours, however, when for sale in the market place, are no whit different from shoes or potatoes. If they are abundant their price, in this case wages and salaries, goes down.
This would be true in any case just from competition, but it is greatly accentuated in those occupations most affected by technological advancement. Here the fundamental discrepancy arises from the fact that man-hours are competing not only with themselves but with kilowatt-hours developed from coal and water power. Physically, a man-hour represents a certain small amount of energy. A kilowatt-hour represents 13 times as much energy as that developed by a strong man working one hour. Yet a kilowatt-hour can be bought at a commercial rate of about one cent, while man-hours marketed at 25 cents each constitute starvation wages. Furthermore, it is an axiom of machine design that in any process wherein the same operations are repeated over and over again indefinitely, a machine can always be devised that can do the job better, faster, and cheaper than any human being.
The result of all this is that while it is physically possible, and in fact already a fait accompli, that our social mechanism can be operated while requiring of each of its members only a limited number of hours of service per day, it is impossible under Price System rules to pay them a living wage in exchange for these services. The unavoidable consequence, if the Price System rules are to be preserved, is that the unemployed must be kept quiet, which requires that they be fed and clothed at the minimum standard necessary to achieve that result.
Since it would remove the keystone of our whole social organization and constitute a violation of its fundamental article of faith which states that it is contrary to the will of God that man should receive something for nothing, for the unemployed to receive relief without working for it, it manifestly becomes necessary that work be provided for which wages can be paid. This work, however, must in no manner interfere with the activities of legitimate business, and the average wages paid for it must be below the average paid by legitimate business so that there will be no tendency for anyone to seek to better his social position by going on relief.
All this, so far as it concerns the destitute, has become familiar enough to the people of the North American Continent over the last several years and need not be dwelt upon further here.
Man-Hours and Income
There is, however, another side to the picture that demands consideration. The industrial production of goods and services is a physical process and consumption is also a physical process. Contrary to all the textbooks of economics, which state that human wants are insatiable, the fact is that human beings, regardless of income, can only consume a limited amount of food per day, can only wear one outfit of clothing at a time, and so with all other forms of consumption. The result is that when the income of an individual or family reaches a certain size, this saturation is produced and any further income goes into non-consuming expenditures or else, into savings. Incomes smaller than this critical amount are almost all spent for consumption, and savings from them are negligible. Above this critical amount the fraction of the income saved increases rapidly.
The transition between the small incomes and the large, between those with negligible and those with large savings is, of course, gradual, but it may be taken arbitrarily at about $5,000 per family. Using this figure as an arbitrary division between large and small incomes, we find, according to the Brookings Institution study, America's Capacity to Consume, that in 1929 out of a total Of 27 millions of families in the United States, 25 million, or 91 percent had incomes less than $5,000 and 2 million, or 9 percent, had incomes greater than this amount. Yet of the total savings of 15.1 billions of dollars, 12.5 billions were made by the 9 percent of the families whose incomes were greater than $5,000.
Merely because they constitute such an overwhelming majority it is the people with small incomes who do most of the consuming of the products of industry, and since these people spend essentially their entire incomes for consumption, we may say that industry runs or shuts down on the basis of the aggregate total of the small incomes. If these are increasing, consumption increases and industrial production increases; if these are decreasing, consumption decreases and industry begins to shut down.
The Problem of Income
The small incomes, however, are predominantly derived from the marketing of man-hours of personal service, and we have already seen that when available man-hours exceed the requirement for man-hours their price goes down. This in turn curtails small incomes which then leads to the stagnation of industrial operation. If we let e be the total of all man-hours marketed in a given year at an average wage of w, and i be the total income received from that source, then
If this income is all spent for goods and services at an average price p, then the number of units c that can be consumed is
But on the average, production must approximately equal consumption so that the number of units q produced per year must equal the units c consumed, and
This is necessarily true of that part of production and consumption accounted for by the recipients of small incomes, but since these are responsible, because of their great superiority in numbers, for the bulk of the consumption of the products of industry, it also is the controlling factor of industrial production.
We already know that with production constant or even increasing, he total man-hours e are decreasing. Consequently from equation (7) at any given price level, p, the consumption can only equal production provided the total income i is proportional to the production. This is is only possible provided, that wage rates be increased in proportion to the decline of total man-hours. Were this done purchasing power could be maintained adequate for any arbitrary level of production, and with zero unemployment. If it is not done, purchasing power will decline, the spectre of unemployment will remain and will become aggravated with time, and production will again shut down.
This leads us to the significant conclusion that in order to maintain production the public must be paid enough purchasing power to buy an the goods reduced, independently of the amount of work done per man or woman, or whether they work at all or not.
Yet if we supply this purchasing power in the only legitimate Price System manner, namely, in payment for man-hours of services rendered on the basis of the market value of man-hours, we find the purchasing power of the vast majority of our population becoming inadequate to maintain industrial operation. So that not only is this a problem of he individual consumer; it is the life-and-death problem of political government and business.
The Flow of Money
Still another way of approaching the same problem is by means of following the circulatory flow of money. Let us lump all productive and distributive enterprises together under the term industry and all consumers together as the consumer. In a given year the consumer spends a certain amount of money for the goods and services produced. This constitutes the income received by industry.
A part of this income received from the consumer, industry distributes through wages and salaries, royalties, rent, interest, and dividends directly back to the consumer again. A part is retained as surplus, a part goes into the hands of corporate financial institutions, and a part is paid as taxes, the latter being distributed principally as salaries to consumers.
Of the money paid by industry directly or indirectly to the consumer, about half goes to the 9 percent with large incomes and the remaining half to the 91 percent with small incomes. About 20 percent of all individual incomes is `saved' and does not become available directly for a second purchase of consumers goods and services from industry. The fraction withheld by industry itself as surplus is likewise withdrawn from immediate re-use as consumer purchasing power.
We thus see that if industry operates profitably and any of its income is withheld either as surplus or by financial institutions from becoming consumer income, and if individual incomes are in part withheld from direct purchases of the products of industry, the income of the public after each circulation will become less than it was the time before, and the monetary flow will be rapidly `dried up.' Unless this deficit is somehow made up elsewhere, industry will shut down as a result.
The customary way for the deficit to be made up is by investment into new industrial plant and equipment. For example, if a billion dollars which is withheld in one of those ways is spent on a new plant, it goes out as wages, salaries, and the like into consumer income and is available for further purchase of consumer goods. The financing of new plant is commonly affected through bank loans, bonds, or mortgages, all of which constitute new debt, and hence represent an actual increase of the money in circulation; or new plant can be built with money saved up as corporate surplus, which by this means is fed back into the channel of consumer purchasing power.
Decline of Interest Rate and Consumer Income
In this connection it should be pointed out that the common denominator of all kinds of money, except the negligible amount of gold, is debt. Governmental currency is the government's promise to pay; a bank deposit is the debt owed by the banker to the depositor; and a bond is a certificate of debt from the issuer to the purchaser. Thus if a million dollars worth of bonds be issued and marketed, the total debt, or money, in circulation is increased by roughly a million dollars. Hence debt and money can be created out of nothing. Debt can also be annihilated into nothing, the call of a loan or of a bond issue being such an instance. (For elaboration of this point see Wealth, Virtual Wealth and Debt by Frederick Soddy, E. P. Dutton and Company, N. Y.)
Thus from what we have seen, if industry, financial institutions, and individuals save, the savings can be reinvested into industry through the mechanism of new debt creation, and if the investment is used to build new industrial equipment the money then circulates back to consumer income and makes up the deficit created by the initial withdrawal.
This, in fact, is what did happen in the growth of American industry up until about the time of the World War. During that time our industry was growing at a rate such that its output doubled every 12 years. But that was also the period for which an expansion of industry meant an expansion of employment.
Now let us consider what happens when the discrepancy between the amount of the large incomes and that of the small becomes so great that the amount withdrawn as savings is too large to be absorbed by new industry. For example, when the consumer income (chiefly the small incomes) becomes inadequate to keep the existing plant from operating to capacity, investments into new industrial plant have little probability of proving profitable. Consequently such investments are, in general, not made.
Under these conditions new debt is not issued at a rate equal to the accrual of savings, and savings are either hoarded or employed to purchase the securities of already existing plant.
This has two immediate consequences: One is that the `paper investment' of savings into old securities of existing plant merely results in distributing the profits from the existing plant to the holders of an ever-increasing number of dollars worth of capital investments, which also means that the returns per hundred dollars invested, or the interest rate, must continuously decline. The other is that the money paid back to the consumer is no longer equal to that withdrawn from circulation as savings, which leads to a standing deficit in the consumer income available for the purchase of the goods and services of industry. As technological advancement and the resultant discrepancy between large and small incomes increases, this situation can only get worse with time.
Stimulants to Distribution
Both of these factors, the slowing down of industrial expansion and the slowing down of paper investment [into the securities of existing industry with a consequent decline of the interest rate and increasing deficit in consumer purchasing power] have been dominant influences in the United States since the World War. Here let it again be emphasized that these results are in nowise due to the War, but to long-time evolutionary trends, the World War being merely a convenient date of reference.
In this manner we arrived at a stage of development wherein the legitimate procedures of business, which in an earlier day were sufficient, were no longer adequate to meet the necessary conditions for social stability. Consequently extraordinary measures have had to be instituted. One of these measures was the World War itself. Purchasing power with which to buy the products of industry was provided by means of government and foreign debts. Industry was boomed by the wartime destruction of its products. During and after the war lavish credits were extended abroad and consumer purchasing power at home was bolstered through the debt creation mechanism of installment buying.
All of these measures were obviously temporary in that they could not be kept up. They contained no provision for self-liquidation except by repudiation, and indeed a day of reckoning did come in 1929. After that time a new method of meeting the same discrepancy of purchasing power had to be provided, and since business had already played its cards, the government had to come to the rescue, and the deficit in consumer purchasing power was in part made up through the governmental creation of debt in the form of the unbalanced budget.
The New Deal
This, it may be remarked, is the sole secret of what little success may be boasted by the New Deal. The purchasing power of the small income public was not adequate to maintain consumption and industrial operation at previous levels. By the mechanism of the unbalanced budget this was in some measure made up through the emergency and relief expenditures of the United States government. Consumption increased; production followed. By the year 1937 industrial production was again n approaching and in some instances exceeding the previous all-time high in 1929. At this stage the spokesmen of business, still imbued with the doctrines of the economists concerning the efficacy of 'confidence' and apparently unaware that the government spending was the only important source for making up the deficit in the business budget, set up a hue and cry for the government to balance its budget. Promises to balance the budget were made and the excess of government expenditures over receipts was reduced from 4.8 billions of dollars in 1936 to 2.8 in 1937. The immediate consequence of this was the most drastic curtailment of industrial production yet known. Between September, 1937 and January, 1938--but 4 months--the volume of industrial production dropped by an amount which in the 1929 'crash' required the 20 months from October, 1929 to July, 1931. Yet the 1937 instance has been euphemistically called a 'recession.' Again, as in 1933, the solution to this situation was found in the prompt injection of more billions of dollars of government money into the purchasing power of the small income public. (Note: in the original version of this article, published in Technocracy A-8, 1936, it is stated: ``Since nothing has been done in the meantime by private industry to 'provide for the deficit in small incomes, it follows that, should the federal government discontinue its relief and emergency expenditures whereby purchasing power is given to individuals, industrial production will again shut down, but faster and tighter than it has ever shut down before.'')
Since there is no mechanism whereby private business is able to make up this deficit it still follows that the only thing that is keeping business off the rocks is the continuation of government spending into the indefinite future; or, what amounts to the same thing financially--war!
The whole virtue of government spending--as long as it can be kept up--consists in the fact that money is being paid to the small income public in excess of the amount simultaneously taken away in the form of taxes. It is a simple matter to see that if the consumer income is already inadequate to support industrial operation, the situation is in nowise changed by governmental robbing of Peter to pay Paul because Paul and Peter still have between them the same purchasing power after as before. On the other hand, if Paul is paid some new dollars especially created for the occasion without the robbing of Peter, the total purchasing power of the two of them is increased by the amount of the new debt created.
It has already been noted that while the previous methods of meeting this deficit in consumer purchasing power have been varied--rapid industrial expansion, world war, foreign credits, installment buying-- they all have this in common: That they were temporary expedients and could not be maintained as a permanent policy. This is no less true of the government unbalanced budget except that when this fails it carries with it the collapse of the entire financial structure.
Fallacy of Price Reduction Argument
Of late there have been voluminous propaganda arguments to the effect that the deficit in purchasing power has been offset by the decline in the prices of manufactured articles, the decline in the price of automobiles from several thousand dollars to about $500 each being a favorite exhibit. The irrelevance of this is obvious when it is considered that the deficit in purchasing power results entirely from the fact that in order for industry to operate profitably and at the same time to disburse any funds at all to large incomes, the amount paid back to small incomes must be less than that taken from the consumer originally. This is entirely independent of the price of the product. but necessitates that the price, however small it may be, must always be greater than the cost of production. Thus no matter how greatly prices may be reduced, the money paid back to the small income public by any industrial enterprise operating profitably is always insufficient to enable the public to buy back its total output. The same must therefore be true of all industry when lumped together.
Another specious argument often heard is that all businesses operate at a loss and thereby represent a source of surplus purchasing power. The fallacy here is that almost every one-armed road stand Constitutes a `business.' Consequently, while the total number of such business enterprises is large, the part played by them is inconsequential as compared with the vast corporate enterprises such as railroads, steel, oil, and the like. In fact, a prevailing interest rate greater than zero is itself a statistical average of the profits and losses of all business enterprises and indicates the excess of profits over losses.
IV. A TECHNOLOGICAL
Scientific Approach to the Problem
In the foregoing, our industrial growth and its Price System monetary control have been considered in some detail because this is one of the most misunderstood and misrepresented problems we have to deal with at the present time; yet the phenomena here discussed are fundamental with respect to all the major problems in the operation of our social mechanism.
What we have seen is that our leaders of business and government have gone from one blind expedient to another without the slightest prospect of accomplishing anything more effective than a postponement of the evil day when no expedient can be made to work any longer. Yet, in spite of all efforts, one-third of the population of this, the most richly endowed Continent on earth, have become virtually pauperized, and the people of North America may consider themselves fortunate indeed if they are not further induced by the same business and political leadership to offer up a human sacrifice over a trumped-up foreign war as an additional futile gesture.
A more eloquent example of demonstrated incompetence on the part of social leaders is not to be found in all the annals of human history!
What is there so difficult about the problem? What is it that has to be done in order to solve it? Simply and solely that our Continental totality shall be operated at a maximum of efficiency with a maximum conservation of resources for the maximum production and distribution of physical wealth--with a resultant standard of living greater than has ever been obtained on the North American Continent.
To do this requires a social organization designed to operate all production sequences and a distributive mechanism that will deliver the products of industry to the consuming public at whatever rate is required.
Getting Something for Nothing
In the distribution to the public of the products of industry, the failure of the present system is the direct result of the faulty premise upon which it is based. This is: that somehow a man is able by his personal services to render to society the equivalent of what he receives, from which it follows that the distribution to each shall be in accordance with the services rendered and that those who do not work must not eat. This is what our propagandists call `the impossibility of getting something for nothing.'
Aside from the fact that only by means of the sophistries of lawyers and economists can it be explained how, on this basis, those who do nothing at all frequently receive the largest shares of the national income, the simple fact is that it is impossible for any man to contribute to the social system the physical equivalent of what it costs that system to maintain him from birth till death-and the higher the physical standard of living the greater is this discrepancy. This is because man is an engine operating under the limitations of the same physical laws as any other engine. The energy that it takes to operate him is several times as much as any amount of work he can possibly perform. If, in addition to his food, he receives also the products of modern industry, this is due to the fact that material and energy resources happen to be available and, as compared with any contribution he can make, constitute a free gift from heaven.
Stated more specifically, it costs the social system on the North American Continent the energy equivalent to nearly 10 tons of coal per year to maintain one man at the average present standard of living, and no contribution he can possibly make in terms of the energy conversion of his individual effort will ever repay the social system the cost of his social maintenance. It is not to be wondered at, therefore, that a distributive mechanism based upon so rank a fallacy should fail to distribute; the marvel is that it has worked as well as it has.
Since any human being, regardless of his personal contribution, is a social dependent with respect to the energy resources upon which society operates, and since every operation within a given society is effected at the cost of a degradation of an available supply of energy, this energy degradation, measured in appropriate physical units such as kilowatt-hours, constitutes the common physical cost of all social operations. Since also the energy-cost of maintaining a human being exceeds by a large amount his ability to repay, we can abandon the fiction that what one is to receive is in payment for what one has done, and recognize that what we are really doing is utilizing the bounty that nature has provided us. Under these circumstances we recognize that we all are getting something for nothing, and the simplest way of effecting distribution is on a basis of equality, especially so when it is considered that production can be set equal to the limit of our capacity to consume, commensurate with adequate conservation of our physical resources.
Income in Units of Energy
On this basis our distribution then becomes foolproof and incredibly simple. We keep our records of the physical costs of production in terms of the amount of extraneous energy degraded. We set industrial production arbitrarily at a rate equal to the saturation of the physical capacity of our public to consume. We distribute purchasing power in the form of energy certificates to the public, the amount issued to each being equivalent to his pro rata share of the energy-cost of the consumer goods and services to be produced during the balanced-load period for which the certificates are issued. These certificates bear the identification of the person to whom issued and are nonnegotiable. They resemble a bank check in that they bear no face denomination, this being entered at the time of spending. They are surrendered upon the purchase of goods or services at any center of distribution and are permanently cancelled, becoming entries in a uniform accounting system. Being nonnegotiable, they cannot be lost, stolen, gambled, or given away because they are invalid in the hands of any person other than the one to whom issued. If lost, like a bank checkbook, new ones may be had for the asking. Neither can they be saved because they become void at the termination of the two year period for which they are issued. They can only be spent.
Contrary to Price System rules, the purchasing power of an individual is no longer based upon the fallacious premise that a man is being paid in proportion to the so-called value' of his work (since it is a physical fact that what he receives is greatly in excess of his individual effort) but upon the equal pro rata division of the net energy degraded in the production of consumer goods and services. In this manner the income of an individual is in nowise dependent upon the nature of his work, and we are then left free to reduce the working hours of our population to as low a level as technological advancement will allow, without in any manner jeopardizing the national or individual income, and without the slightest unemployment problem or poverty.
The period of work required of each individual, once the reconstruction following the transition from the old system to the new is complete, need be no longer than about 4 hours per day, 164 days per year, from the ages Of 25 to 45. The income of each individual, however, will continue without interruption until death. Hence the insecurity of old age is abolished and both saving and insurance become unnecessary and impossible.
Such a mechanism of distribution simply renders all forms of trade and commerce obsolete, and at the same time, because of the abolition of money, makes them impossible. The entire social mechanism then becomes one unit organization with as many branches as there are industrial and social functions to perform. This organization, the Technate, comprises all members of the population.
The area to be operated as a unit is the entire Continent of North America.
At the outset it was proposed to investigate by the methods of science the problem of technological unemployment and the related problem --the breakdown of our traditional system of distribution. We have made that investigation and we have found that machines do destroy jobs. We have found that during American history up until the time of the World War, while mechanization was destroying jobs, the expansion of industry was such that the birthrate of new jobs exceeded the death rate of old, but since the War, with industrial growth leveling off, the death rate of old jobs has continuously exceeded the birth rate of new.
Since, however, our present distributive mechanism is based upon the payment for man-hours of service, at least for those who have nothing else to exchange, it has been necessary for us to examine critically the fundamental Price System premises underlying our monetary mechanism of trade and commerce. In this we have found that rules which grew up to meet the needs of handicraft, individually owned, small-scale industry are no longer adequate to effect the distribution of the products of large-scale, mechanized industry, and that the increasing instability of our present social organization is the direct consequence of the flat contradictions between the beliefs handed down from- an ignorant past and the physical realities of the problem we are obliged to face today.
The problem of coordinating and operating the biggest array of industrial equipment on the face of the earth and distributing its products to the population concerned is an entirely new kind of problem that the human species has never had to face before. It is unavoidably a technical problem-a problem whose solution will demand the application of science to our social order, requiring the coordination and participation of all citizens.
It was the recognition of the nature of this problem that led the scientists of the Technical Alliance, the predecessor of Technocracy, as early as 1919 to realize that the time was approaching when a new, scientifically designed social mechanism would eventually become imperative when the one we have now could no longer be made to work. A very brief summary of the distributive system designed by Technocracy Inc. has been given here. This system is based upon the realities and exactitudes of scientific measurement and is consequently entirely subject to control so that it can be made at all times to do precisely what is wanted of it.
The time of transition from the old, outmoded Price System with its enforced scarcity, toil, and privation to the New America of abundance and leisure is fast approaching. Technocracy Inc. therefore invites the cooperation of every functionally capable citizen of North America to assist in the biggest designing and construction job in all history. end file of Man-hours and Distribution Man-hours and Distribution M. King Hubbert
More on Hubbert and The Technocrats
Tags: M. King Hubbert, Technocracy technate design, Energy Accounting, Technocracy Study Course Technocracy Study Course - excerpted design chapters and links to the complete copy.
In the wake of the recent interview with Jay Hanson posted at The Oil Drum The Oil Drum: Australia/New Zealand | Hubbert: King Of The Technocrats , there was some discussion of Hubbert's role in the Technocracy movement.
''I hadn't been aware that Hubbert was a Technocrat (or that the technocrats were an organized grouping, for that matter), so in this post I'll explore the Technocracy movement and Hubbert's role in it.'' From the article
The knowledge essential to competent intellectual leadership in this situation is preeminently geological - a knowledge of the earth's mineral and energy resources. The importance of any science, socially, is its effect on what people think and what they do. It is time earth scientists again become a major force in how people think rather than how they live. - M King Hubbert
M. King Hubbert joined the staff of Columbia University in 1931 and met Howard Scott, who had earlier founded a group of engineers and scientists called "The Technical Alliance". Hubbert and Scott co-founded Technocracy Incorporated in 1933, with Scott as leader and Hubbert as Secretary.
The Technocrats were influenced by figures such as Thorsten Veblen, author of "Engineers and the price system", and Frederick Soddy, winner of the Nobel Prize for chemistry in 1921 and author of "Wealth, Virtual Wealth and Debt" which looked at the role of energy in economic systems. Soddy criticized the focus on monetary flows in economics, arguing that “real” wealth was derived from the use of energy to transform materials into physical goods and services.
The world's present industrial civilization is handicapped by the coexistence of two universal, overlapping, and incompatible intellectual systems: the accumulated knowledge of the last four centuries of the properties and interrelationships of matter and energy; and the associated monetary culture which has evolved from folkways of prehistoric origin. Despite their inherent incompatibilities, these two systems during the last two centuries have had one fundamental characteristic in common, namely, exponential growth, which has made a reasonably stable coexistence possible.
But, for various reasons, it is impossible for the matter-energy system to sustain exponential growth for more than a few tens of doublings, and this phase is by now almost over.
The monetary system has no such constraints, and, according to one of its most fundamental rules, it must continue to grow by compound interest.
This disparity between a monetary system which continues to grow exponentially and a physical system which is unable to do so leads to an increase with time in the ratio of money to the output of the physical system. This manifests itself as price inflation. A monetary alternative corresponding to a zero physical growth rate would be a zero interest rate. The result in either case would be large-scale financial instability. - M King Hubbert
Technocracy Technocratic movement
Technocracy is form of government which is administered by scientists and technical experts, resulting in a form of planned economy.
Technocracy Incorporated provided information from the Technical Alliance, aimed to establish a zero growth, science based socio-economic system, based on ideas of conservation and abundance as opposed to the usual scarcity-based economic systems.
In a technocratic system, money is replaced with energy accounting, which records the amount of energy used to produce and distribute goods and services consumed by citizens in a Technate (Technocracy based society). The units of this accounting system are known as Energy Certificates.
Energy certificates are not saved or earned, but periodically distributed among the populace, with the number calculated by determining the total productive capacity of the technate and dividing it equally after infrastructure requirements are met. Certificates not used during a period expire.
Technocracy Incorporated lists the following papers as Hubbert's contributions to Technocracy:
* Professor Hubbert was the primary author of the Technocracy Study Course.
* Man-Hours and Distribution which was derived from an earlier article, Man-Hours -- A Declining Quantity in Technocracy, Series A, No. 8, August 1936.
* Determining the Most Probable in Technocracy, Series A, No. 12, June 1938
* Some Facts of Life in Technocracy, Series A, No. 5, December, 1935.
* The ``Spirit of the Constitution'' in Technocracy, Series A, No. 6, March 1936.
* Book review: The Tools of Tomorrow in Technocracy, Series A, No. 3, Aug 1935
* Book Review: Reshaping Agriculture and Nations Can Live at Home. Technocracy, Series A, Number 7, May 1936
* Book review: An Orientation in Science in Technocracy, Series A, No. 16, July, 1939.
Technocracy Inc also has a tract on 'Technocracy and Peak Oil', which outlines a vision of abundant energy for all if we are willingly to become sufficiently efficient in our energy usage ie... adopt a technate.
So why does Technocracy think that its proposal can "save" us from Peak Oil? Quite simply Technocracy's plan knows how to do more with less. Technocracy's design will allow all North Americans to live with a standard of living many times greater than is the average even today. Not only this, but is does so by using far less, both in terms of resources and labour. The calculations done as part of the initial study performed by Technocracy's scientists back in 1930 showed that at that time it would be possible for every citizen to have a standard of living the equivalent of a lower-upper class income, and only have to work for 16 hours per week, with 2 and a half months vacation per year, at a job that they have both chosen and were well trained for.
Also included were things such as free, high-quality education and health care, indefinite maternity rights, and retirement at age 45 with no loss of income or benefits. How they could achieve this was through an ingenious reorganization of continent-wide industry, that would unleash its potential to produce this "abundance" for all.
They showed conclusively how business, politics, and money were all holding back this production, and causing ever-greater need of waste of resources. The key was automation, which allows us to produce more while requiring less resources to do it, as well as less labour to operate these machines.
Today it is obvious that automation has improved many thousands of times, with the advent of the computer and industrial robotics. There in no longer any need whatsoever for anyone to have to work at a menial labor or unskilled service-industry job because it can mostly be performed by machines.
By harnessing automation like this, we consume far less resources, including energy, and can still increase our overall standard of living. It should be obvious that with so little energy consumption, and the enhanced abilities of scientific research allowed by a society of abundance (scientific social design), we would have plenty of time to devise alternative and sustainable sources of energy that would also be non-polluting.
Our ignorance is not so vast as our failure to use what we know.
We are not starting from zero, we have an enormous amount of existing technical knowledge.
It's just a matter of putting it all together.
We still have great flexibility but our maneuverability will diminish with time. - M King Hubbert.
An extensive bibliography of M. King Hubbert's work [pdf] has been compiled by Chris Kuykendall. Some highlights follow below, including a number of important documents archived on this website.
Hubbert Bibliography Compilation Project
Geological Society of America M. King Hubbert at 100: The Enduring Contributions of Twentieth-Century Geology’s Renaissance Man
The North American Technate TNAT
Open source file copy : Man-hours and Distribution M. King Hubbert