Global economic growth is an increase in the mass of matter that corresponds to the level of human productive activities within the terrestrial sphere’s constant mass. The creation of modern civilization and progress can and, in the general interest, ought to be interpreted also in such nonanthropomorphic, nonsociological terms.

Once the implied psychological barrier is crossed, we can readily understand that the laws of physics guarantee that, just like any smaller-scale process of weight gain in a fixed space, the expansion of material output must also come to an end. The rate at which matter flows through the closed “environment-economy-environment” circuit has an absolute upper limit, a comprehensive “aggregate peak.”

Annual oil production lingering near its maximum profitable level (“peak oil”) is only the most apparent sign of the emerging trend and pattern of the global economy’s encounter with its nature-dictated limits. The attention it receives is well deserved. But we would follow vulgar, physics-free economics into the cul-de-sac of narrowly focused, selective rationality if we failed to scan the entire horizon for resource shortages.

Predictions coming from the community of independent energy analysts place the year of peak natural gas production within the next two decades. And “peak hydrocarbons” is not alone in weakening long-term economic prospects.

Elemental exhaustion right ahead!

According to the renowned Netherlands-based research institute, TNO Defense, Security and Safety, the threat of material scarcity is real and imminent. In his presentation, entitled “Materials Scarcity and the Elements of Hope” (Bioneers Global Conference, May 31- June 1, 2010, Driebergen, Netherlands), TNO’s André Diederen, senior scientist and leading international authority in the field, identified emergent excess demand for the following elements:

“Precious metals,” i.e., Silver, Gold, and the platinum group (Ruthenium, Rhodium, Palladium, Osmium, Iridium, in addition to Platinum); “minor metals” Gallium, Germanium, Indium, and Tellurium; the “tungsten group” (i.e., Tantalum, Zirconium, Niobium, and Molybdenum, in addition to Tungsten) and most of the Lanthanides or “rare earth metals,” which total 15 with the inclusion of Lutetium.

The significance of this list can hardly be overstated. As alloys, catalysts, and components, they are indispensable in the production of structural materials, computers, a wide range of industrial goods, household appliances, medical and optical products, transportation, space-engineering, and defense equipment. Similar to the difficulties associated with “peak oil,” the fundamental problem is not that the planet is about to run out of usable reserves but that their supplies are likely to become too costly to support wished-for levels of economic growth.

Excess demand for the listed elements (calculated in the quoted presentation as demand for them in pure form and/or for all their known compounds minus supply of the same inclusive of recycling), is on the rise now or will soon be. That is, the same symptoms that allowed independent analysts to conclude that the “age of peak oil” (chronic excess demand, increased “rent” payments to reserve owners, and intensified pressure for substitution) is upon us may be observed in the depletion of numerous other primary material inputs as well.

Cascading resource peaks — a new factor in economic evolution

Neoclassical doctrine (the old school) clings to the belief that the market solves natural resource problems simply, quickly, and efficiently on its own. It always did and always will.

Enduring scarcity, the theory asserts, raises the price of a vanishing nonrenewable. The best substitute, as expensive as it had been before, appears to be relatively cheap. Demand for it increases, curtailing the need for the maxed-out substance. That is, the system makes the economy reach for the “backstop input” and related “backstop technology” reflexively. The substitute, which becomes increasingly affordable as a result of economies of scale and competition among its providers, will be built gradually into the economy’s circulatory system. Growth continues uninterrupted and the peaked resource is soon forgotten. Graphically, the annual production of nonrenewables charted against a horizontal time axis is expected to yield “Hubbert-like curves” that ascend, reach maximum, and then decline.

The validity of this mechanism has been confirmed and reconfirmed during the past two centuries. But alas, it never had to face the task of substituting for many natural resources at the same time — an unprecedented conjuncture, loaded with the menace of self-debilitating entanglement.

Compounded substitution compounds the problem of substitution.

Increased demand for replacement is bound to reduce the lifetime of at least some of the newly introduced primary inputs. Visualizing the interaction among substitute materials as a block within a detailed input-output transaction matrix, we are reminded that each of them must use some of its own output (“own demand”) while becoming dependent on the rest of the substitute branches as suppliers and outlets. A couple of weak links in the expanding “inter-industry” flow among substitutes (given the increasing size of the “substitutes submatrix” overtime) is sufficient to endanger economic growth and stability through supply shortfalls and price hikes.

As the conviction that the era of cheap energy is over assumes pre-analytic significance (as it should), the whole enterprise of reaching for virgin resources appears in a new light. Economic infeasibility owing to higher energy costs reduces substitution alternatives. Gaping holes appear in the set of solutions earlier regarded as scientifically valid and plausible from a business point of view.

The availability of affordable material inputs also reduces the feasibility of turning the page on fossil fuels. Here is an example.

Eminent California-based scientists M.Z. Jacobson and M.A. Delucci estimated that a comprehensive strategy to move the world’s energy use to sustainable grounds would require about 3.8 million wind turbines. (See, “A Plan to Power 100 Percent of the Planet with Renewables, Scientific American Magazine, November 2009). But, according to the quoted presentation by André Diederen, the manufacture of that many large (5 MW) wind turbines would demand roughly 3 million tons of Neodymium. The current annual production is 18,000 tons and Lenntech (an associate organization of the Technical University of Delft in the Netherlands) puts global reserves of Neodymium at eight million tons.

Evidently, there will be no 3.8 million wind turbines as long as there are no affordable substitutes for Neodymium, which is required for their production.

Trapped in a “no-exit situation”

If the principle of sustainability is followed to the letter, the undeniably dire need for further, enormous increases in economic output falters on prohibitive physical constraints as surely as a mud ball flying toward a cement wall.

For the human biomass and its productive activities to remain within the planet’s carrying capacity, demand for energy should not exceed the bounds of what renewable sources can yield. As far as material inputs are concerned, the production of biological feedstocks (renewable substitutes for industrial materials) at acceptable social costs (i.e., without further aggravating environmental problems) and the possibilities of increased reliance on superabundant elements and their compounds set the limits.

Respected academic sources assure us — and high level international scientific and political forums repeatedly echo the conclusion — that long-run demand for energy and material inputs outstrips what the Earth can provide without damaging homo sapiens’ evolutionary potential.

Ecological footprint calculations (the brainchild of UBC Professor William Rees) show a gross and worsening overshoot of global resources. Correction will demand downscaling. Renewables set the limit on activities at a much lower scale than even the current level of global output, and a decisive shift to superabundant nonrenewables threatens to transform the escalating energy and material costs of cluster substitution into an insuperable police cordon on the supposedly never-ending turnpike of economic growth.

Global society has understandably reached for the defense mechanism that psychologists call “denial.” It takes two forms: Eschew comprehensive, integral analysis and indulge in narcissistic self-intoxication regarding the limitless powers of “science and technology.” Both forms are harmful in the long run. The first allows the public to find solace in positive assessments obtained at the cost of disregarding what a particular solution signifies and the second is a mere siren song. Fusing “science” and “technology” into a single concept wrongly conflates theory with practice. Science refers to solutions on paper, on the computer screen, or in labs, while technology means the profitable physical incorporation of “R & D” results.

The unconscious refusal to see the big picture in all its dimensions has led to a fatally-flawed societal perspective on the future. Although this may be unavoidable, those who ought to know better must bear some responsibility.

Old school economics makes the world stand on its head day after day. How does it do it?

First, it asks the public to kneel down by acknowledging that the planet’s natural resources are finite. The instruction to bend forward may be seen as analogue to the admission that they can indeed be exhausted. The command to place the forearms on the floor and clasp the fingers so as to create a stable foundation reconfirms that these observations are basic, undeniable, and worthy of serious consideration. But now watch out! When the public begins to gush in awe, saying things like “Wow, there is another way to look at natural resources,” we know that its full weight has been placed on its head. After the knees have been straightened with toes pointing toward the skies we may safely level the query: “And what is that certain other way; what do you see?

The answer is not surprising; you can find it in any mainstream economics textbook: “What a splendid vista. Natural resources have been increasing.”

The explanation is that human ingenuity — innovation, “science and technology” — render natural resources more abundant each year because what counts is not how much there is but how productively we use what is left. If a given type of resource still in the ground can potentially produce more in 2011 than the amount used up this year, we can say that its stock has effectively increased.

When the world eventually finds out that this upside-down view contributed to the destruction of global commons and was instrumental in causing resource-shortage-triggered economic shocks, neoclassical thought will not be regarded as the wise and benevolent guru. It will be seen more like the vicious hypnotist Cipolla in Thomas Mann’s 1929 symbolic masterpiece “Mario and the Magician.” Once Mario, the manipulated public, shakes off the spell, Cipolla is in trouble. He does not leave the stage amidst enthusiastic applause and yells of “Bravo” to pick up his annual due — the Nobel Prize.

All this, of course, is not intended to belittle the role increasing returns on primary material inputs has played in creating and enhancing prosperity. Nonetheless, our picture of reality is overdue for a drastic expansion. Exponential economic growth based on the accelerated depletion of nonrenewable natural resources cannot be eternalized. Vexingly preposterous theories and practices to the contrary will not survive much longer with apparent impunity.

The deep roots of techno-fetish

Simple questions beg to be asked. How is it possible that legions of scholars fail to recognize the enormity of the problems inherent in the unfolding collision between economic ambitions and physical constraints? Why the angry, systematic attempts to sideline and neutralize insights into the limits to growth?

The general answer is equally simple.

Historic experience has not yet necessitated the recognition that the second law of thermodynamics (the entropy law) is just as relevant to material welfare as the first (or conservation) law.

If we consider only the first law, nature indeed appears to accommodate unending innovation in the service of perpetual economic growth.

Given the virtually unlimited amounts of energy around us and Einstein’s famous discovery about the equivalence of mass and energy, resources do appear to be virtually infinite; the terrestrial sphere seems to have inexhaustible reserves. The practical asymmetry between mass and energy and the consequent inevitable buildup of entropy are the most obvious blind spots of this vision.

When thinking about mineralogical riches and production techniques (i.e., not about general relativity), mass can be equated with matter. As soon as we do that, the mirage of solar energy substituting for orderly structures vanishes. Energy can be produced from matter but the reverse is impossible in economically significant quantities. We cannot make oil from chemical energy, coal from electricity, metals from sunshine. The growth of biomass through photosynthesis also draws from the Earth’s supply of matter. Photons from the yellow star do not become substance; they only facilitate the synthesis of what is already here. From an economic standpoint, the planet’s mass (weight) and composition of matter may be considered fixed.

Removing the blinders

To see in its fullness why and how the second law of thermodynamics renders nature scarce, we need recourse to the concept of natural capital, defined here as the totality of structured order in human service.

Through this broad interpretation we lump together material resources (e.g., oil, timber, metals) and the capacity of the environment to render services such as waste absorption, the regulation of the atmosphere, the enjoyment of scenic assets, and other amenities.

If we define entropy as the ratio of useless substances within all substances, we must accept that both the depletion of nonrenewable resources and the liquidation of pristine ecological conditions through filling environmental sinks beyond their regenerating capacity increases entropy. That is, both processes turn usable structures (“free energy”) into unusable ones (“bound energy”).

Importantly, not only energy, but matter is also subject to the second law. Through production and consumption (via the environment-economy-environment flow-through) some structure is always lost beyond redemption. All technological processes, whether the production of energy or material goods, reduce the ratio of economically accessible to total energy (where total energy is the sum of accessible or “free” plus inaccessible or “bound” energy). And the consequences of irrevocable degradation (i.e., the transformation of low entropy structures into high entropy ones) remain with us forever.

Paying heed to the entropy law has two axiom-strength bearings

First, unfavorable and irrevocable developments accompany economic expansion. Second, nature’s manipulability is far from being unlimited because technological possibilities are not independent from the state of matter in the terrestrial sphere and that state changes with the growth of human presence and the size of the planet’s economy.

A corollary of significance: Scientific information does not flow freely from creative minds into industry. It only appears that way when we ignore what went into the platform upon which innovative thinking could build.

The creed that “science and technology” facilitates and stimulates economic growth without paying for it in terms of usable material and environmental stability imputes powers to the human intellect it does not possess. Discarding this sanguine expectation leads to the conclusion that an unpredictable nonlinear process is surreptitiously “de-dynamizing” economic growth the way it is currently defined, worshiped, and pursued.

An immanent characteristic of our time is that academically sanctioned expertise ignores the entropy law.

With its rigid theoretical norms, outmoded value predicates, and codes of conduct, mainstream economists are either unable to recognize that the fundamental stratum of material welfare is subjected to exponential diminution; or, they are unwilling to follow up on the recognition.

Either way, arguments about the importance of potentially rising energy and material resource costs remain pretty much like shouts in the Kalahari Desert.

There will be consequences. As the immortal Greek playwright Aeschylus said two and a half millennia ago: “Who refuses to listen, must be made to feel.”