Understanding Economic Growth: Light: Wednesday Focus: April 22, 2014
Dirk Hanson: Drowning in Light: “William D. Nordhaus calculated that the average citizen of Babylon would have had to work a total of 41 hours to buy enough lamp oil to equal a 75-watt light bulb burning for one hour…
…At the time of the American Revolution, a colonial would have been able to purchase the same amount of light, in the form of candles, for about five hour’s worth of work. And by 1992, the average American, using compact fluorescents, could earn the same amount of light in less than one second….
Jeff Tsao… and his coworkers at Sandia have concluded that “the result of increases in luminous efficacy has been an increase in demand for energy used for lighting that nearly exactly offsets the efficiency gains—essentially a 100% rebound in energy use.”… Tsao calculates that, as a result, light represents a constant fraction of per capita gross domestic product (GDP) over time; the world has been spending 0.72 percent of its GDP for light for 300 years now…
6,000 years, a drop in price from 45 x 60 x 60 to 1–of 12 in the log–produces an average rate of technological change in lighting of 0.2%/year, and with a spending share of 0.72% the implication that we are 90% richer today than we would be with Babylon-style lighting (and optimal adjustment of production to compensate).
To say that “90% of economic growth is due to X” is wrong, because the implication is that other factors all together add up to only 10%, and that is not true–in log-scale national income accounting there are an awful lot of 90% factors between “so poor as to face imminent death” and our present relative prosperity. And even on its own terms 90% is an overestimate: that the path that led us here was one along which improvements in illumination technology generated so much productivity growth does not mean that if we by some magical means we lost our lighting technology we could not reconfigure our economy so as to still produce most of what we do even without artificial illumination.
But it is–as Nordhaus intended it to be–a very striking illustration: if such a small part of what we regard as our economy is, when we do the obvious calculation, a source of enormous growth, and since there is little terribly special about progress in illumination, we should then thin very hard about exactly how much economic growth we have realized since the neolithic, and how different we are in our lives from our ancestors only 10,000 years ago.