Science and the Wealth of Nations

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Bernard C. Beaudreauoffers convincing explanations for the 1970s productivity slump, Solow's info paradox, and policy failures in Western economies.

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Bernard C. Beaudreau offers convincing explanations for the 1970s productivity slump, Solow’s info paradox, and policy failures in Western economies.

Image courtesy of interviewee. March 14, 2024

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This video video discusses the central argument of a book titled "Science and the Wealth of Nations," which posits that economic growth is fundamentally linked to energy and material processes, rather than being driven by ideas alone. The author argues that the industrial revolutions were largely about increasing production speeds using energy sources like fossil fuels, exemplified by advancements such as the steam engine.

Key points include:

1. **Energy and Production**: Economic growth is grounded in the availability and use of energy, arguing that while ideas can enhance efficiency, they do not, by themselves, increase production output.

2. **Historical Context**: The author traces the history of productivity increases from the 18th to the 20th century, emphasizing that productivity is closely related to how much energy is harnessed per worker.

3. **Workers' Roles**: The claim is made that modern workers have transitioned from physically laboring to supervisory roles over machines, thereby changing the nature of productivity.

4. **Laws of Physics**: The argument suggests that theories of economic growth should be informed by the laws of physics, particularly regarding energy and speed, rather than solely moral or philosophical considerations.

5. **Productivity Slowdown**: This video video touches on the productivity slowdown observed since the 1970s, suggesting this is due to the inability to increase production speeds further.

6. **Limitations of Ideas**: Information technology's proliferation does not translate directly into increased productivity, as data and computers do not provide additional energy for output.

In conclusion, the author insists that future economic growth will require renewed focus on sources of energy and innovative methods to enhance the speed of production. Without overcoming existing limitations in energy usage and production efficiency, further economic growth may stagnate.

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In the book itself, would I argue that it is not

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because of the fact that you have to understand that growth,

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economic growth is essentially based on, on a,

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on material processes.

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Okay? Material processes are essentially powered by energy,

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and that ideas in

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and of themselves are not a form of energy, okay?

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So the thing if you look at the industrial revolution from,

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from the 18th century on, we find ourselves

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with a situation in which output actually increases

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manyfold, okay?

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Uh, over the 18th, 19th, and even into the 20th century.

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But this was all the result of the fact that we,

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essentially, what we have done,

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and this is something that is not necessarily

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understood, is we had, what we did

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with the industrial revolution is we sp we speeded up

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production processes that existed.

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So the steam engine, what the steam engine did is it

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increased output by increasing what,

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at the time they referred to as the velocity of production.

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So what this means, essentially, is that if,

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if you look at history, okay?

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The reason why we grew in Neo zero is

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because we had more energy

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and we kept increasing the speed of things, okay?

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If you look at an idea-based growth, okay?

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Ideas are not a form of energy.

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You know, I can have a lot of ideas,

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but that doesn't, doesn't necessarily mean

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that I will be able to produce more output.

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You may increase, okay?

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There is a caveat in this,

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and that is the fact that if you have a better, if you,

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some, some ideas will increase the efficiency

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with which you use energy, okay?

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But those are very, very, very limited.

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So, to answer your question, an idea based,

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growth theory is just, it, it, it, it violates the laws

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of physics and, and,

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and the laws of physics apply to material processes.

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And so my answer is that it, it doesn't, yeah.

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Well, what I do is I essentially show in the, in the book,

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which is entitled Science and, and,

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and the Wealth of Nations, what I do is I take a, a, a,

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like a scientific approach, where I essentially

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invoke the laws of physics to understand history,

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to understand, you know, the growth of the wealth

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of nations over the 18th, 19th, and 20th centuries.

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And what I essentially argue is that, that it fits, all

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of this fits, okay?

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Uh, that there's, there, if you look at the increase in you,

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if you trace out two curves, okay?

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The increase in the amount of energy used per worker,

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and you in, and you trace out another curve,

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which looks at the increase this way, I guess in the camera,

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an increase in per capita output,

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those things are very coline, okay?

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And the reason being is that,

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and I, I, this may sound somewhat controversial,

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but workers these days don't work. And, and they

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Workers stopped working at the

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beginning of the 19th century.

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They stopped working because they no longer were the source

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of energy in the material processes

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that existed at the time.

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Okay? So workers, this may sound controversial,

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but workers really don't work.

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Workers are now supervisors. Okay?

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Al Alfred Marshall, who was a great,

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19th century economist, who is really the father

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of microeconomics today, referred

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to workers in the following terms, he referred to them

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as machine operatives.

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Okay? So if, if you go in any, any, any plant these days,

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you'll see that mo workers don't work physically.

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They're just sitting there in front of a, I don't know,

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a screen, or they're looking at out what the way,

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a machine is working, and that's all they do, okay?

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They don't, they aren't, they are not, from a physical point

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of view, productive, okay?

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I know that sounds very controversial

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because we always talk about that labor productivity,

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but if you invoke the laws of basic,

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you wanna invoke the laws of basic physics,

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classical mechanics, okay?

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Or even thermodynamics. Okay?

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Uh, workers do not work, okay?

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So in many ways, if you look at,

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if you look at it scientifically, what you can, what,

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what I show in the book essentially is that,

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that the reason why we are rich today,

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the reason why we went from poverty to, to richness

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or to riches these days is

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because we were able to exploit

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the energy contained in fossil fuels

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and the energy contained in, in, in all other forms

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of primary energy.

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So, in many ways, the book essentially shows that if you,

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if you take a scientific point of view, okay,

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you can explain everything.

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And it really comes down to the laws of physics.

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And this is something, let me just be clear about this.

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I'm not the first person to say this.

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It was said by many people starting in 1832 by,

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a, a British kind of mathematician, economist,

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se savant by the name of Charles Babbage.

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And he was able to put, you know, hit the,

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the nail on the head, by arguing essentially

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that it was all about power.

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Okay? Another person that really,

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that is surprising in this whole, in this whole literature,

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is someone by the name of Karl Marx, okay?

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That everyone knows of.

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And interestingly, if you read,

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and I invite your listeners to do so,

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if you read Das Capal, okay, which was published in 1867,

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you'll find that the first seven chapters of Das Capal,

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he develops in the first seven,

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he develops the labor theory of value.

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So he argues, essentially in the first seven chapters

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that labor is the source of all wealth, okay?

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That's what's referred to as a labor theory of value.

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And, it's still very common among Marxists today.

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I mean, Marxists today see the labor theory value

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as being their core concept.

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But if you, if you go

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and read chapter 15 of das Capital, what you see is

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that Marx kind of dallies in physics, okay?

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And, and this is really surprising

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because chapter 15, if you, if you read

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between the lines chapter 15, you know,

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disproves the first chap, the first seven chapters

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of Des Cap Patel,

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because in chapter 15, he argues,

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it's like he had read some sort of engineering textbook

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where he, where he's describing machines

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and how machines work

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and how power is a, is, is, is, is, is applied

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to various tools and so on and so forth.

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So, in many ways, I am able to show in the book

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that essentially, that the wealth

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of nation should be looked at from a scientific point

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of view, and not necessarily from a

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moralistic point of view.

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And, and, and it's important to remember

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that Adam Smith was not a natural philosopher.

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Adam Smith was a moral philosopher.

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He had no training in natural philosophy.

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Uh, and by the time, what I mean by natural philosophy is,

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is Newtonian kind of physics.

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So in many ways, this, this is the,

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that's the gist of the book.

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I'll begin by invoking something referred

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to as the law of kinetics.

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Okay? The law of kinetics states that the velocity of, of,

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of any, object, okay, will

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increase, okay?

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And, but that the, the amount of energy required

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to increase velocity, is, is, is the square, okay?

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Which means that if you double the speed of a car

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or a plane, okay, you're going

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to quadruple the amount of energy.

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So what happens is that, let me just start going back

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to the early industrial revolution.

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The early industrial revolution was a result of speed, okay?

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We took material processes that existed at the time,

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and what we did with the steam engine is we just

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sped them up, okay?

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So we take something and we make it go faster, okay?

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And that's what the Industrial Revolution did.

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If you look at, the, the, spinning, the spinning,

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machine and the spinning, and, and weaving and, and,

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and, and, and other

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sub tasks in the textile industry,

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what the Industrial Revolution did was speed

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everything up, okay?

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And that's how we increased productivity.

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So to give you an example,

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if you're driving on the highway at 30 miles an hour,

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your productivity is that in one hour, you will go 30 miles.

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If you double your speed, okay, of the same car, your,

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your productivity will have doubled

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because you will now go 60 miles in that same hour.

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And that also applies to the wealth of nations.

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And that is that if you speed up pro,

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an existing machine, you will,

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you will increase productivity.

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So if you look at, at the, the first industrial revolution,

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the second industrial revolution, okay?

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They were all about speed, okay?

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In the second industrial revolution, we had electric motors,

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and we increased the speed

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at which we can produce at which machines produce output.

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Okay? I don't know if you've ever seen Charlie Chaplin,

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in modern times, there's a movie called Modern Times

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by Charlie Chaplin in the 1930s, and he illustrates this.

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Charlie Chaplin is very perspicacious

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because he illustrates how the, the theme of the movie,

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and I invite your listeners to actually watch it,

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it's free on, on, on, on YouTube.

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And so Charlie Chaplin really gets it all right?

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He says that, you know, the problem in 1930s was

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that we were speeding things up at a, at a pace, that

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that was too much for the, for, for human beings.

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So, okay, let's, okay.

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So we've established now that speed was the key

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to the first industrial revolution,

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the second industrial revolution.

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Now, you get into the 19, after the second World War, okay?

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Uh, after the second World War speed, our, our,

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industrial processes we're speeded up again, okay?

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So we're really going fast now, okay?

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Everything, pulp

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and Pa I, one industry

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that I know quite well is the pulp and paper industry.

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And machines were going at almost lightning

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speeds at the time.

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But what happened was in the 19, in the 1950s, late 1960s,

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I should say, and early 1970s, we hit a ceiling,

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we could not increase speeds anymore.

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And to give you an example, take for example, jet travel.

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All, most of your listeners will have taken a plane,

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sometime in their life, probably currently,

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or not too long ago.

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Uh, but it, it's important to understand that, that,

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that the speeds at which planes travel okay,

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today is actually slower than it was in the

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sixties and seventies.

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And that, you know, we,

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we can't go any faster than we did that.

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Another example is your clock speed on your computer, okay?

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Which is called, in, measured in CPU, that has,

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that has kind of maxed out, okay?

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We've maxed out speeds

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and in most industrial processes, now,

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we can't go any faster, okay?

238
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Without breakdown, without, machine, you know, machines,

239
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overheating, and so on and so forth.

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So, what I argue in the book, essentially is

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that if you look at the productivity slowdown in the 1970s,

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which is essentially your question, what that was the result

243
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of is the fact that we could not increase speeds anymore.

244
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Okay? We had, we, we'd kind of maxed out. So let's get back.

245
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Another part of your question was the, the,

246
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the information paradox, okay?

247
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Which is, which is, is attributed to Robert Solo.

248
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And the, according to the information paradox,

249
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we see computers everywhere,

250
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but we don't see them in the data.

251
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And in my, in the book, what I argue is that is predicted

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by a, a mo like science that in many ways ideas

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or data or computers are not, are, are, are,

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are devices which allow us to increase the amount

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of information that we have and process and store,

256
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but they don't increase productivity

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'cause they're not a source of energy, okay?

258
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Like, and, and,

259
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and this is predicted by my work that,

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that even if you increase the amount of information,

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you do not increase output

262
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because information is not physically productive.

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And so that, I mean, it's all consistent.

264
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What I, what I wanna get at here

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and for your listeners is the fact that the solo resi, if,

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if, if you ask people in the pure science is the solo

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residual is predicted by their work, okay?

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It's not predicted by economists

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because economists are moral philosophers, okay?

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Robert Solo doesn't have training in, in the, in,

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in, in, in science.

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Uh, so it's not surprising

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because from the get go from Adam Smith on

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economics has been the realm of moral philosophers,

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not natural philosophers.

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And the point of the book really is, is that for us

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to understand growth, we have to put our, put our money on,

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on natural philosophy and on physics.

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And this is something that's

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absent from economics these days.

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If you ask any economist, da ma, PhD, you know what,

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what, how wealth is created, they'll tell you capital labor,

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energy is, is, is not even on, not even on the table.

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The implications are kind of a little somber in the sense

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that, my work predicts that,

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that that regardless of the amount of r

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and d that we do, okay?

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The, we, we are now throwing literally trillions

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of dollars at r and d.

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And my work predicts that

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unless we increase the amount of energy that each worker

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kind of overseas or has as at his

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or her disposal, there will not be an increase in output.

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And this is predicted by physics.

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I mean, this isn't, this isn't something it, it's new

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to economists, but it's something that

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just follows from the laws of physics.

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So what I argue essentially is that

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because of the fact that we can't, it's like my car,

300
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let's go back to my car.

301
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We can't go any faster or my plane

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and CPU, we can't go any faster.

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And because we can't go any faster,

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we can't increase productivity, okay?

305
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So productivity has always been,

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if you look at it historically about speed,

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and we have maxed out in speed.

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So that means what that means that, that a lot

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of government policies, according to my, according

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to physics, a lot of government policy, which is based on r

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and d, you know, like trillions, we spent appro,

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approximately like 2% of world GDP,

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roughly $1.7 trillion on r and d.

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And none of that, none of that will be,

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will increase productivity.

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And, and this has been shown time

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and again, I mean, productivity slowdown is still alive. It

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Is, is still well,

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and, so in many ways, I think what I, the,

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the main conclusion is that

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unless we find a way to speed things up,

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our productivity will, will have maxed out.

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And I'll give you an example of that.

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In agriculture, the big push these days

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is on speeding up tractors, okay?

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Tractors, combines, harvesters, and so on and so forth.

327
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And if you look at the, large companies like,

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like John Deere and

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Maxey Ferguson and all the other large,

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agricultural implement, producers, the, the,

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the key is trying to speed things up.

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Uh, and so tractors are going faster,

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harvesters are going faster, plows are going faster.

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But if you can't increase speed, if you can't make,

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things at a faster pace, your productivity will remain

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where it's, and that's what we find in computers.

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I mean, computer speeds have leveled off now, okay?

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And so we've gotten to like twin, twin core,

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quadruple quad core computing in PA in a parallel way.

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But each CPU has maxed out.

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So the conclusion to answer the question is that

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unless we find a way to kind of overcome the laws

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of kinetics, we are stuck where we are.

Energy's Role in Economic Growth Explained

00:00:00 - In the book itself, would I argue that it is not because of the fact that you have to understand that growth, economic growth is essentially based on, on a, on material processes. Okay? Material processes are essentially powered by energy, and that ideas in and of themselves are not a form of energy, okay? So the thing if you look at the industrial revolution from, from the 18th century on, we find ourselves
00:00:33 - manyfold, okay? over the 18th, 19th, and even into the 20th century. But this was all the result of the fact that we, essentially, what we have done, and this is something that is not necessarily understood, is we had, what we did with the industrial revolution is we sp we speeded up production processes that existed. So the steam engine, what the steam engine did is it increased output by increasing what,
00:01:04 - So what this means, essentially, is that if, if you look at history, okay? The reason why we grew in Neo zero is because we had more energy and we kept increasing the speed of things, okay? If you look at an idea-based growth, okay? Ideas are not a form of energy. You know, I can have a lot of ideas, but that doesn't, doesn't necessarily mean that I will be able to produce more output. You may increase, okay? There is a caveat in this,
00:01:36 - some, some ideas will increase the efficiency with which you use energy, okay? But those are very, very, very limited. So, to answer your question, an idea based, growth theory is just, it, it, it, it violates the laws of physics and, and, and the laws of physics apply to material processes. And so my answer is that it, it doesn't, yeah.
00:02:05 - which is entitled Science and, and, and the Wealth of Nations, what I do is I take a, a, a, like a scientific approach, where I essentially invoke the laws of physics to understand history, to understand, you know, the growth of the wealth of nations over the 18th, 19th, and 20th centuries. And what I essentially argue is that, that it fits, all of this fits, okay? that there's, there, if you look at the increase in you,
00:02:35 - The increase in the amount of energy used per worker, and you in, and you trace out another curve, which looks at the increase this way, I guess in the camera, an increase in per capita output, those things are very coline, okay? And the reason being is that, and I, I, this may sound somewhat controversial, but workers these days don't work. And, and they Workers stopped working at the beginning of the 19th century. They stopped working because they no longer were the source

Supervisors, Machines, and the Illusion of Productivity

00:03:08 - that existed at the time. Okay? So workers, this may sound controversial, but workers really don't work. Workers are now supervisors. Okay? Al Alfred Marshall, who was a great, 19th century economist, who is really the father of microeconomics today, referred to workers in the following terms, he referred to them as machine operatives. Okay? So if, if you go in any, any, any plant these days,
00:03:39 - They're just sitting there in front of a, I don't know, a screen, or they're looking at out what the way, a machine is working, and that's all they do, okay? They don't, they aren't, they are not, from a physical point of view, productive, okay? I know that sounds very controversial because we always talk about that labor productivity, but if you invoke the laws of basic, you wanna invoke the laws of basic physics, classical mechanics, okay? Or even thermodynamics. Okay? workers do not work, okay?
00:04:10 - if you look at it scientifically, what you can, what, what I show in the book essentially is that, that the reason why we are rich today, the reason why we went from poverty to, to richness or to riches these days is because we were able to exploit the energy contained in fossil fuels and the energy contained in, in, in all other forms of primary energy. So, in many ways, the book essentially shows that if you,
00:04:44 - you can explain everything. And it really comes down to the laws of physics. And this is something, let me just be clear about this. I'm not the first person to say this. It was said by many people starting in 1832 by, a, a British kind of mathematician, economist, se savant by the name of Charles Babbage. And he was able to put, you know, hit the, the nail on the head, by arguing essentially
00:05:15 - Okay? Another person that really, that is surprising in this whole, in this whole literature, is someone by the name of Karl Marx, okay? That everyone knows of. And interestingly, if you read, and I invite your listeners to do so, if you read Das Capal, okay, which was published in 1867, you'll find that the first seven chapters of Das Capal, he develops in the first seven, he develops the labor theory of value.
00:05:47 - that labor is the source of all wealth, okay? That's what's referred to as a labor theory of value. And, it's still very common among Marxists today. I mean, Marxists today see the labor theory value as being their core concept. But if you, if you go and read chapter 15 of das Capital, what you see is that Marx kind of dallies in physics, okay? And, and this is really surprising because chapter 15, if you, if you read

Physics and Economic Growth: A Scientific Perspective

00:06:22 - disproves the first chap, the first seven chapters of Des Cap Patel, because in chapter 15, he argues, it's like he had read some sort of engineering textbook where he, where he's describing machines and how machines work and how power is a, is, is, is, is, is applied to various tools and so on and so forth. So, in many ways, I am able to show in the book
00:06:51 - of nation should be looked at from a scientific point of view, and not necessarily from a moralistic point of view. And, and, and it's important to remember that Adam Smith was not a natural philosopher. Adam Smith was a moral philosopher. He had no training in natural philosophy. and by the time, what I mean by natural philosophy is, is Newtonian kind of physics. So in many ways, this, this is the, that's the gist of the book. I'll begin by invoking something referred to as the law of kinetics.
00:07:24 - of any, object, okay, will increase, okay? And, but that the, the amount of energy required to increase velocity, is, is, is the square, okay? Which means that if you double the speed of a car or a plane, okay, you're going to quadruple the amount of energy. So what happens is that, let me just start going back to the early industrial revolution.
00:07:53 - We took material processes that existed at the time, and what we did with the steam engine is we just sped them up, okay? So we take something and we make it go faster, okay? And that's what the Industrial Revolution did. If you look at, the, the, spinning, the spinning, machine and the spinning, and, and weaving and, and, and, and, and other sub tasks in the textile industry, what the Industrial Revolution did was speed
00:08:23 - And that's how we increased productivity. So to give you an example, if you're driving on the highway at 30 miles an hour, your productivity is that in one hour, you will go 30 miles. If you double your speed, okay, of the same car, your, your productivity will have doubled because you will now go 60 miles in that same hour. And that also applies to the wealth of nations. And that is that if you speed up pro, an existing machine, you will, you will increase productivity.
00:08:55 - the second industrial revolution, okay? They were all about speed, okay? In the second industrial revolution, we had electric motors, and we increased the speed at which we can produce at which machines produce output. Okay? I don't know if you've ever seen Charlie Chaplin, in modern times, there's a movie called Modern Times by Charlie Chaplin in the 1930s, and he illustrates this. Charlie Chaplin is very perspicacious

Speed and Productivity in Industrial Revolutions

00:09:26 - and I invite your listeners to actually watch it, it's free on, on, on, on YouTube. And so Charlie Chaplin really gets it all right? He says that, you know, the problem in 1930s was that we were speeding things up at a, at a pace, that that was too much for the, for, for human beings. So, okay, let's, okay. So we've established now that speed was the key to the first industrial revolution, the second industrial revolution. Now, you get into the 19, after the second World War, okay?
00:09:59 - industrial processes we're speeded up again, okay? So we're really going fast now, okay? Everything, pulp and Pa I, one industry that I know quite well is the pulp and paper industry. And machines were going at almost lightning speeds at the time. But what happened was in the 19, in the 1950s, late 1960s, I should say, and early 1970s, we hit a ceiling, we could not increase speeds anymore. And to give you an example, take for example, jet travel.
00:10:31 - sometime in their life, probably currently, or not too long ago. but it, it's important to understand that, that, that the speeds at which planes travel okay, today is actually slower than it was in the sixties and seventies. And that, you know, we, we can't go any faster than we did that. Another example is your clock speed on your computer, okay? Which is called, in, measured in CPU, that has,
00:10:59 - We've maxed out speeds and in most industrial processes, now, we can't go any faster, okay? Without breakdown, without, machine, you know, machines, overheating, and so on and so forth. So, what I argue in the book, essentially is that if you look at the productivity slowdown in the 1970s, which is essentially your question, what that was the result of is the fact that we could not increase speeds anymore. Okay? We had, we, we'd kind of maxed out. So let's get back.
00:11:31 - the information paradox, okay? Which is, which is, is attributed to Robert Solo. And the, according to the information paradox, we see computers everywhere, but we don't see them in the data. And in my, in the book, what I argue is that is predicted by a, a mo like science that in many ways ideas or data or computers are not, are, are, are, are devices which allow us to increase the amount of information that we have and process and store,
00:12:03 - 'cause they're not a source of energy, okay? Like, and, and, and this is predicted by my work that, that even if you increase the amount of information, you do not increase output because information is not physically productive. And so that, I mean, it's all consistent. What I, what I wanna get at here and for your listeners is the fact that the solo resi, if, if, if you ask people in the pure science is the solo residual is predicted by their work, okay?

Rethinking Economics: Speed and Energy Connection

00:12:34 - because economists are moral philosophers, okay? Robert Solo doesn't have training in, in the, in, in, in, in science. so it's not surprising because from the get go from Adam Smith on economics has been the realm of moral philosophers, not natural philosophers. And the point of the book really is, is that for us to understand growth, we have to put our, put our money on, on natural philosophy and on physics. And this is something that's absent from economics these days.
00:13:08 - what, how wealth is created, they'll tell you capital labor, energy is, is, is not even on, not even on the table. The implications are kind of a little somber in the sense that, my work predicts that, that that regardless of the amount of r and d that we do, okay? The, we, we are now throwing literally trillions of dollars at r and d.
00:13:37 - unless we increase the amount of energy that each worker kind of overseas or has as at his or her disposal, there will not be an increase in output. And this is predicted by physics. I mean, this isn't, this isn't something it, it's new to economists, but it's something that just follows from the laws of physics. So what I argue essentially is that because of the fact that we can't, it's like my car,
00:14:07 - We can't go any faster or my plane and CPU, we can't go any faster. And because we can't go any faster, we can't increase productivity, okay? So productivity has always been, if you look at it historically about speed, and we have maxed out in speed. So that means what that means that, that a lot of government policies, according to my, according to physics, a lot of government policy, which is based on r and d, you know, like trillions, we spent appro, approximately like 2% of world GDP,
00:14:41 - And none of that, none of that will be, will increase productivity. And, and this has been shown time and again, I mean, productivity slowdown is still alive. It Is, is still well, and, so in many ways, I think what I, the, the main conclusion is that unless we find a way to speed things up, our productivity will, will have maxed out. And I'll give you an example of that. In agriculture, the big push these days
00:15:14 - Tractors, combines, harvesters, and so on and so forth. And if you look at the, large companies like, like John Deere and Maxey Ferguson and all the other large, agricultural implement, producers, the, the, the key is trying to speed things up. and so tractors are going faster, harvesters are going faster, plows are going faster. But if you can't increase speed, if you can't make,

Computing Speeds: Hitting the Limits

00:16:11 - where it's, and that's what we find in computers. I mean, computer speeds have leveled off now, okay? And so we've gotten to like twin, twin core, quadruple quad core computing in PA in a parallel way. But each CPU has maxed out. So the conclusion to answer the question is that unless we find a way to kind of overcome the laws of kinetics, we are stuck where we are.

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