Wednesday, April 28, 2021

Fourth Franqui Lecture: Energy and the Industrial Revolution

The video of my fourth Francqui lecture on the energy and the industrial revolution is now on Youtube:


The opening graph of population and GDP per capita in the United Kingdom since 0CE combines data from the Maddison Project at the University of Groningen and data produced by Steven Broadberry. The energy data in the next graph was compiled in a 2007 publication by Paul Warde. The graph of energy use in Europe since 1500 and the graph of the composition of energy use are from "Power to the People" by Astrid Kander, Paolo Malanima, and Paul Warde.

The next section of the presentation gives a high level summary of Daron Acemoglu's theory of directed technical change and applies it to the two case studies. The first is my paper coauthored with Jack Pezzey and Yingying Lu, forthcoming in JAERE, on directed technical change and the British industrial revolution. The second is my 2012 paper coauthored with Astrid Kander on the role of energy in the industrial revolution and modern economic growth. As I mentioned in the lecture, we didn't know much about the theory of directed technical change when we wrote this paper and it didn't influence our research. Yet we can explain the results in terms of the theory.

The graphs that open the section on the British industrial revolution use data from Broadberry and Warde as well as from Robert Allen's book on the industrial revolution (the price data). The painting of the Iron Bridge is by William Williams.

Opening the section on Sweden is a photo of the Aitik copper mine. We used data from the Historical National Accounts of Sweden and Astrid's PhD research. If you are wondering how the value of energy could be as large as the GDP in 1800 in Sweden this is because energy is an intermediate good. GDP is value added by labor and capital with land included in capital usually. Gross output of the economy is much larger than the GDP. A huge amount of economic activity was dedicated to producing food, fuel, and fodder.

The solar panels that open the concluding section are in Japan. I've forgotten where.

Monday, April 5, 2021

Third Francqui Lecture: The Rebound Effect

The video of my third Francqui lecture on the rebound effect is now on Youtube:

The first part of the presentation – "What is the Rebound Effect" – mostly comes from my teaching material on the rebound effect. The graph of the macroeconomic price effect comes from Gillingham et al. (2016). In the following two slides, I modified it to show infinitely elastic (assumed by Lemoine (2020) for example) and totally inelastic energy supply, which results in 100% rebound.

The next section – "The Economy-wide Rebound Effect: Evidence" – starts with a graph from my 2017 paper in Climatic Change: "How Accurate are Energy Intensity Projections?".  The graph compares the historical rate of growth of energy intensity to the two "business as usual projections" in the 2016 World Energy Outlook. "Current policies" only includes implemented policies while "New policies" includes announced but not yet implemented policies. The latter is at the extreme of historical decline in energy intensity. This doesn't mean that it can't happen, but we should be sceptical given the performance of IEA projections described in my paper. The following slide shows the first page of another Gillingham et al. article, this time their 2013 paper in Nature. The rest of this section is based on my 2020 Energy Policy article: "How Large is the Economy-wide Rebound Effect?". A sad aspect of this article was that it was invited by Stephen Brown who died while I was writing it.

Saunders (1992) was one of the early papers in the modern revival in interest in the rebound effect. Lemoine (2019) is just a working paper version of Lemoine (2020), mentioned above. Lemoine does for general equilibrium what Saunders did for partial equilibrium. I kind of mangled my explanation of "Intensity vs. growth effects". The proper explanation is in my 2020 Energy Policy article.* Both elasticities on the RHS of the equation will be small if rebound is large and the energy cost share is small. Using Saunders' (1992) model as an example, the first elasticity is equal to sigma-1, where sigma is the elasticity of substitution between capital and energy. But the rebound holding GDP constant is sigma. If the elasticity of substitution is one – which is the case for the Cobb-Douglas function – then rebound is 100% holding GDP constant. The contribution of the second term to rebound is small if the energy cost share is small.

There are two graphs of "historical evidence". The monochrome one is from Arthur van Benthem's 2015 JAERE paper. The color one is based on one in my 2016 Energy Journal paper coauthored with Mar Rubio and Zsuzsanna Csereklyei, which I discussed in the previous lecture. The remaining references in this section are: Saunders (2008), Turner (2009), Rausch and Schwerin (2018), and Adetutu et al. (2016). They're all discussed in my Energy Policy paper.

The final section on "Using SVARs to Estimate the Economy-wide Rebound Effect" is mostly based on Bruns et al. (2020) (working paper). At the end, I added unpulished results on several European countries and Iran. This work was carried out in collaboration with Anne Berner and Mahboubeh Jafari. We haven't posted working papers for this research yet.

The "Conclusion" discusses Fullerton and Ta.

* Note, that almost all my papers also have an open-access working paper version accessible from the RePEc page for the article.