Science and the Wealth of Nations Science and the Wealth of Nations : The Physics of Economic Growth By Bernard C. Beaudreau Science and the Wealth of Nations: The Physics of Economic Growth By Bernard C. Beaudreau This book first published 2021 Cambridge Scholars Publishing Lady Stephenson Library, Newcastle upon Tyne, NE6 2PA, UK British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Copyright © 2021 by Bernard C. Beaudreau All rights for this book reserved. No part of this book may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner. ISBN (10): 1-5275-6581-5 ISBN (13): 978-1-5275-6581-4 My own sense is that New Growth Theory never really had the elements needed to turn it into an intellectual success story; too much of it involved making assumptions about how unmeasurable things affected other unmeasurable things. In short, it was an intellectual bubble that eventually deflated of its own accord. —Paul Krugman, The New Growth Fizzle TABLE OF CONTENTS List of Tables and Figures ......................................................................... xi Preface ...................................................................................................... xv Introduction ............................................................................................ xvii 1 The Enigmatization of Economic Growth ............................................... 1 1.1 Introduction ..................................................................................... 1 1.2 Consilient Formalizations of Growth .............................................. 2 1.3 Literature review: steady-state growth models ............................... 4 1.4 The Exceptions: Mainstream Incursions into the Material Sciences ......................................................................................... 14 1.5 Summary and Conclusions ........................................................... 15 1.6 References ..................................................................................... 16 2 Thinking About Production: From Smith to Romer .............................. 19 2.1 Thinking About Production Prior to the 18th Century ................... 19 2.2 Thinking About Production in the Newtonian Era ........................ 20 2.3 Thinking About Production in the Thermodynamic Era ............... 24 2.4 Thinking About Production in the Electrical Era .......................... 26 2.5 Thinking About Production in the OPEC Era ............................... 32 2.6 Summary and Conclusions............................................................ 35 2.7 References ..................................................................................... 36 3 The Impact of Electric Power on Productivity: A Study of U.S. Manufacturing 1950-84 ............................................................................ 39 3.1 Introduction ................................................................................... 39 3.2 The Marginal Product of Electric Power ...................................... 43 3.3 Accounting for the Sources of Growth in US Manufacturing 1950-84 ......................................................................................... 45 3.4 Electric Power Consumption and Productivity ............................. 46 3.5 Conclusions ................................................................................... 47 3.6 References ..................................................................................... 48 viii Table of Contents 4 The Energy-Organization Framework ................................................... 51 4.1 Introduction ................................................................................... 51 4.2 The Energy-Organization Approach to Modeling Material Processes ....................................................................................... 52 4.3 A Physical Model of Production ................................................... 53 4.4 A General Model of Production Processes: The Energy- Organization Framework ............................................................... 57 4.5 The General Energy-Organization Production Function ............... 60 4.6 Energy-Organization Productivity Measures ................................ 63 4.7 The Energy-Organization Approach to Modeling Production Processes: The Evidence ............................................................... 65 4.8 Summary and Conclusions ........................................................... 71 4.9 Bibliography ................................................................................. 72 5 Engineering and Economic Growth ....................................................... 77 5.1. Introduction .................................................................................. 77 5.2 Growth Processes: Engineering versus Economics ...................... 79 5.3 The Energy-Organization Framework: Theory and Evidence ...... 81 5.4 The Role of Capital and Labor in Growth Accounting ................. 86 5.5 Conclusions ................................................................................... 86 5.6 References ..................................................................................... 87 6 The Dynamo and the Computer: An Engineering Perspective on the Modern Productivity Paradox ........................................................ 89 6.1 Introduction ................................................................................... 89 6.2 Production Processes as Seen by Engineers .................................. 91 6.3 Implications for the Modern Productivity Paradox ....................... 95 6.4 Conclusions ................................................................................. 100 6.5 References ................................................................................... 101 7 The Physical Limits to Economic Growth by R&D Funded Innovation ............................................................................................... 105 7.1 Introduction ................................................................................. 105 7.2 The Productivity Slowdown, Policy Responses and R&D Expenditure ................................................................................. 107 7.3 Residual Growth and R&D ......................................................... 108 7.4 The Evidence .............................................................................. 108 7.5 Wealth: The Underlying Physics ................................................ 110 7.6. Estimates of Potential Increases in Energy Efficiency ............... 112 7.7 Commercial ................................................................................. 121 7.6. Results: The Upper Bound of R&D Energy Efficiency ............. 123 Science and the Wealth of Nations: The Physics of Economic Growth ix 7.7 Conclusions ................................................................................. 124 7.8 References ................................................................................... 125 8 The Economies of Speed, KE=1/2mv2 and the Productivity Slowdown ............................................................................................... 129 8.1. Introduction ................................................................................ 129 8.2. Speed, Energy Deepening and Control Technologies ................ 131 8.3 Model .......................................................................................... 135 8.4. Empirical Evidence .................................................................... 137 8.5. Further Evidence of the Law of Kinetics in Manufacturing ...... 143 8.6. The Limits to Speed, Control Technologies and the Productivity Slowdown .................................................................................... 146 8.7 Case studies ................................................................................. 150 8.8 Implications ................................................................................ 155 8.9. Summary and Conclusions ......................................................... 159 8.10 Appendix ................................................................................... 160 8.11 References ................................................................................. 161 9 A Kinetics-Based Approach to Production: Theory and Evidence ...... 165 9.1 Introduction ................................................................................. 165 9.2 Non-Mainstream Contributions .................................................. 167 9.3 The Critics: Big on Principles, Small on Specifics ..................... 172 9.4 Model .......................................................................................... 176 9.5 Production Activity Indicators .................................................... 182 9.6 Empirical Evidence ..................................................................... 182 9.7 Applications and Implications .................................................... 189 9.8 Summary and Conclusions ......................................................... 191 9.9 References ................................................................................... 192 10 Ideas That Do and Don’t Matter….For Growth ................................ 195 10.1 Introduction ............................................................................... 195 10.2 Innovations/Developments That Increased the Demand for Speed ..................................................................................... 199 10.3 Innovations/Ideas that Don’t Matter ......................................... 201 10.4 Prognosis for Future .................................................................. 202 10.5 Exponential R&D Growth and Anemic Productivity Growth .. 203 10.6 Summary and Conclusions ........................................................ 207 10.7 References ................................................................................. 207 Summary and Conclusions ..................................................................... 209