Guest Post: Why A Finite World Is A Problem

Tyler Durden's picture

Submitted by Gail Tverberg via Our Finite World blog,

Why is a finite world a problem? I can think of many answers:

1. A finite world is a problem because we and all of the other creatures living in this world share the same piece of “real estate.” If humans use increasingly more resources, other species necessarily use less. Even “renewable” resources are shared with other species. If humans use more, other species must use less. Solar panels covering the desert floor interfere with normal wildlife; the use of plants for biofuels means less area is available for planting food and for vegetation preferred by desirable insects, such as bees.

2. A finite world is governed by cycles. We like to project in straight lines or as constant percentage increases, but the real world doesn’t follow such patterns. Each day has 24 hours. Water moves in waves. Humans are born, mature, and die. A resource is extracted from an area, and the area suddenly becomes much poorer once the income from those exports is removed. Once a country becomes poorer, fighting is likely to break out. A recent example of this is Egypt’s loss of oil exports, about the time of the Arab Spring uprisings in 2011 (Figure 1). The fighting has not yet stopped. 

Figure 1. Egypt's oil production and consumption, based on BP's 2013 Statistical Review of World Energy data.

Figure 1. Egypt’s oil production and consumption, based on BP’s 2013 Statistical Review of World Energy data.

The interconnectedness of resources with the way economies work, and the problems that occur when those resources are not present, make the future much less predictable than most models would suggest.

3.  A finite world means that we eventually run short of easy-to-extract resources of many types, including fossil fuels, uranium, and metals.  This doesn’t mean that we will “run out” of these resources. Instead, it means that the extraction process will become more expensive for these fuels and metals, unless technology somehow acts to hold costs down. If extraction costs rise, anything made using these fuels and metals becomes more expensive, assuming businesses selling these products are able to recover their costs. (If they don’t, they go out of business, quickly!) Figure 2 shows that a recent turning point toward higher costs came in 2002, for both energy products and base metals.

Figure 2. World Bank Energy (oil, natural gas, and coal) and Base Metals price indices, using 2005 US dollars, indexed to 2010 = 100.  Data source: World Bank.

Figure 2. World Bank Energy (oil, natural gas, and coal) and Base Metals price indices, using 2005 US dollars, indexed to 2010 = 100. Base metals exclude iron. Data source: World Bank.


4. A finite world means that globalization will prove to be a major problem, because it added proportionately far more humans to world demand than it added undeveloped resources to world supply. China was added to the World Trade Organization in December 2001. Its use of fuels of all types skyrocketed quickly soon afterward (Figure 3, below). As noted in Item 3 above, the turning point for prices of fuels and metals was in 2002. In my view, this was not a coincidence–it was connected with rising demand from China, as well as the fact that we had extracted a considerable share of the cheap to extract fuels earlier.

Figure 3. Energy consumption by source for China based on BP 2013 Statistical Review of World Energy.

Figure 3. Energy consumption by source for China based on BP 2013 Statistical Review of World Energy.

5. In a finite world, wages don’t rise as much as fuel and metal extraction costs rise, because the extra extraction costs add no real benefit to society–they simply remove resources that could have been put to work elsewhere in the economy. We are, in effect, becoming less and less efficient at producing energy products and metals. This happens because we are producing fuels that are located in harder to reach places and that have more pollutants mixed in. Metal ores have similar problems–they are deeper and of lower concentration. All of the extra human effort and extra resource expenditure does not produce more end product. Instead, we are left with less human effort and less resources to invest in the rest of the economy. As a result, total production of goods and services for the economy tends to stagnate.

In such an economy, workers find that their inflation-adjusted wages tend to lag. (This happens because the total economy produces less, so each worker’s share of what is produced is less.) Companies producing energy and metal products are also likely to find it harder to make a profit, because with lagging wages, consumers cannot afford to buy very much product at the higher prices. In fact, there is likely to be the danger of an abrupt drop in production, because prices remain too low to justify the high cost of additional investment.

6. When workers can afford less and less (see Item 5 above), we end up with multiple problems:

a. If workers can afford less, they cut back in discretionary spending. This tends to slow or eventually stop economic growth. Lack of economic growth eventually affects stock market prices, since stock prices assume that sale of their products will continue to grow indefinitely.

b. If workers can afford less, one item that is increasingly out of reach is a more expensive home. As result, housing prices tend to stagnate or fall with stagnating wages and rising fuel and metals prices. The government can somewhat fix the problem through low interest rates and more commercial sales–that is why the problem is mostly gone now.

c. If workers find their wages lagging, and some are laid off, they increasingly fall back on government services. This leaves governments with a need to pay out more in benefits, without being able to collect sufficient taxes. Thus, governments ultimately end up with financial problems, if extraction costs for fuels and metals rise faster than can be offset by innovation, as they have been since 2002.

7. A finite world means that the need for debt keeps increasing, at the same time the ability to repay debt starts to fall. Workers find that goods, such as cars, are increasingly out of their ability to pay for them, because car prices are affected by the rising cost of metals and fuels. As a result, debt levels need to rise to buy these cars. Governments find that they need more debt to pay for all of the services promised to increasingly impoverished workers. Even energy companies find a need for more debt. For example, according to today’s Wall Street Journal,

Last year, 80 big energy companies in North America spent a combined $50.6 billion more than they brought in from their operations, according to data from S&P Capital IQ. That deficit was twice as high as in 2011, and four times as high as in 2010.

At the same time that the need for debt is increasing, the ability to pay it back is falling. Discretionary income of workers is lagging, because of today’s high prices of fuels and metals. Governments find it difficult to raise taxes. Fuel and metal companies find it hard to raise prices enough to  finance operations out of cash flow. Ultimately, (which may not be too in the future) this situation has to come to an unhappy end.

Figure 4. Repaying loans is easy in a growing economy, but much more difficult in a shrinking economy.

Figure 4. Repaying loans is easy in a growing economy, but much more difficult in a shrinking economy.

Governments can cover up this problem for a while, with super low interest rates. But if interest rates ever rise again, the increase in interest rates is likely to lead to huge debt defaults, and major financial failures internationally. This happens because higher interest rates lead to a need for higher taxes, and because higher interest rates mean purchases such as  homes, cars, and new factories become less affordable. Rising interest rates also mean that the selling price of existing bonds falls, potentially creating financial problems for banks and insurance companies.

8. The fact that the world is finite means that economic growth will need to slow and eventually stop. We are already seeing slower economic growth in the parts of the world  that have seen a drop in oil consumption (European Union, the United States, and Japan), even as the rest of the world has seen rising oil consumption.

Figure 5. Oil consumption based on BP's 2013 Statistical Review of World Energy.

Figure 5. Oil consumption based on BP’s 2013 Statistical Review of World Energy.

Countries that have had particularly steep drops in oil consumption, such as Greece (Figure 6 below), have had particularly steep drops in their economic growth, while countries with rapid increases in oil and other energy consumption, such as China shown in Figure 2 above, have shown rapid economic growth.

Figure 6. Oil consumption of Greece, Based on EIA data.

Figure 6. Oil consumption of Greece, Based on EIA data.

The reason why we are already reaching difficulties with oil consumption is because for oil, we are reaching limits of a finite world. We have already pulled out most of the easy to extract oil, and what is left is more expensive and slow to extract. World oil production is not rising very fast in total, and the price needs to be high to cover the high cost of extraction.  Someone has to be left out. The countries that use a large proportion of oil in their energy mix (like Greece, with its tourist trade) find that the products they produce are too expensive in a world marketplace. Countries that use mostly coal (which is cheaper), such as China, have a huge cost advantage in a cost-competitive world.

9. The fact that the world is finite has been omitted from virtually every model predicting the future. This means that economic models are virtually all wrong. The models generally predict that economic growth will continue indefinitely, but this is not really possible in a finite world. The models don’t even consider the fact that economic growth will scale back in mature economies.

Even climate change models include far too much future fossil fuel use, in both their standard runs and in their “peak oil” scenarios. This is convenient for regulators. Oil limits are scary because they indicate a possible near-term problem. If a climate change model indicates a need to cut back on future fossil fuel use, these models give the regulator a more distant problem to talk about instead.

10. Even the most basic economic relationships tend to be mis-estimated in a finite world. It is common for economists to look at relationships that worked in the past,  and assume that similar relationships will work now. For example, researchers like to look at how much debt an economy can afford relative to GDP, or how much debt a business can afford. The problem is that the amount of debt an economy or a business can afford shrinks dramatically, as the economic growth rates shrinks, unless the interest rate is extremely low.

As another example, economists believe that higher prices will lead to substitutes or a reduction in demand. Unfortunately, they have never stopped to consider that the reduction in demand for an energy product might have a serious adverse impact on the economy–for example, it could mean many fewer jobs are available. Fewer jobs mean less demand (or affordability), but is that what is really desired?

Economists also seem to believe that prices for oil products will keep rising, until they eventually reach the price level of substitutes. If people are poorer, this is not necessarily the case, as discussed above.

11. Besides energy products and metals, there are many other limits that are a problem in a finite world. There is already an inadequate supply of fresh water in many parts of the world. This problem can be solved with desalination, but doing so is expensive and takes resources away from other uses.

Arable land in a finite world is subject to limits. Soil is subject to erosion and degrades in quality if it is mistreated. Food is dependent on oil, water, arable land, and soil quality, so it quickly reaches limits if any of these inputs are disturbed. Pollinating insects, such as bees, are also important.

Probably the biggest problem in a finite world is the problem of too high population. Before fossil fuel use was added, the world could feed only 1 billion people. It is not clear that even that many could be fed today, without fossil fuels. The world’s population now exceeds 7 billion.

Where We Are Now in a Finite World

At this point, the problem of hitting limits in a finite world has morphed into primarily a financial problem. Governments are particularly affected. They find that they need to borrow increasing amounts of money to provide promised services to their citizens. Debt is a huge problem, both for governments and for individual citizens. Interest rates need to stay very low, in order for the current system to “stick together.”

Governments are either unaware of the true nature of their problems, or are doing everything they can to hide the true situation from their constituents. Governments rely on economists for advice on what to do next. Economists’ models do a very poor job of representing today’s world, so they provide little useful guidance.

The primary way of dealing with limits seems to be “solutions” dictated by concern over climate change. These solutions are of questionable benefit when it comes to the real limits of a finite world, but they do make it look like politicians are doing something useful. They also provide a continuing revenue stream to academic institutions and “green” businesses.

The public has been placated by all kinds of misleading stories about how oil from shale will be the solution. Quantitative Easing (used by governments to lower interest rates) has temporarily allowed stock markets to soar, and allowed interest rates to stay quite low. So superficially, everything looks great. The question is how long all of this will last. Will interest rates rise, and undo the happy situation? Or will a different financial problem (for example, a debt problem in Europe or Japan) bring the house of cards down? Or will the ultimate problem be a decline in oil supply, perhaps caused by oil and gas companies reaching debt limits?

2014 will be an interesting year. Let’s all keep our fingers crossed as to how things will work out. It is surreal how close we can be to limits, without major media catching on to what the problem really is.

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VD's picture

QE4EVA is infinite and that's all u need to know, bityatch!

max2205's picture

Seriously. ..the only people who listen to govt BS amounts to maybe 1 million...they play till is so obvious then punch out.


Aca BS audience is a lot more and most get that it is bend over time as they realize what they voted in

Muppet Pimp's picture

This piece was great and so easy to understand a caveman can do it, bravo. 

Now, what about Woar?  Can't Woar make the chart showing how much oil the US uses and how much the rest of the world uses mean revert?  And can we get a reference to the Georgia Guide(to the future)stones?

jimmytorpedo's picture

Resources - finite

Desire - infinite

That is all you need to know to be an economist.

bentaxle's picture

The finite planet meme should just be common sense. If a human burns wood, for fire, and the trees start getting further and further away sooner or later even the dumbest human should be able to work out why. 

We all know, finite means finite!

But, yes, our desires are infinite and finite is awkward.

Luckily there is a solution! (Even though you, me and everyone knows damned well there is not!!)

If I could fix this problem and it wouldn't cost that much, (all I want is a banker's salary) and...........your vote and then I will make all these finite "problems" go away, would you do it, there's even a iPhone in it for yer. The "solution" is distraction, er sorry....economic growth. And we will measure economic growth with....GDP and we can increase GDP with "added value" and we don't even need real money any more. We can have all the energy we need supplied by nuclear and advancing technology means we can have growth by recycling most of our resources with "Total Factor Productivity" and to make sure we use what resources we have left sensibly, we will put ownership of them in the hands of a small number of people (an elegant solution for control purposes only, of course,) and then strictly regulate their release by committee etc......doesn't that sound like a great plan?  Sarc off 


A Lunatic's picture

The human race is it's own extinction level event.......

Element's picture

Humans are a self-regulating process like all other species. But due to our relative success at managing our destiny, i.e. engineering our own inevitable and quite routine dissolution (forgive me, I've seen far too many fossils in the rocks to take humans seriously as a special-case), we have made the very cute and innocent noobish mistake of assuming it'll be us who does the regulating.




Most of the consternation and ideological thrashing that goes on around this topic is purely due to the ego's failure to come to terms with our total lack of any effective steering-role within the actual self-regulation mechanism.


Other than that, things are progressing extremely well. :-)

stacking12321's picture

i don't know about you, but i intend to evolve into a being of pure energy.

Element's picture

Good for you, but you are a being of pure energy right now.

FredFlintstone's picture

Kinda like a lump of coal?

Element's picture

Yeah, why not, it's all interchangeable. maybe put some ketchup on it.

Tall Tom's picture

No, Element. He is NOT Pure Energy. He is made of Matter and exists in the Temporal Realm, as you. It is Mass that is Energy and Mass is just one property of Matter. Dimension is another property as Matter depends upon Geometry in order to define it as such. (Most Matter is vaccuous with concentrations of elementary Energy/Mass Fields)


It takes a transmutation of Mass with a concurrent loss of Dimensionality for the transformation of Matter into Pure Energy which is Light.


Currently we do this as we smash Atoms in Particle Accelerators. We are also pretty good at using Fission Reactors*** in order to transmute Matter into Energy. Of course an Nuclear Bomb is just a reactor in an Extreme Geometry.


***Fukushima Daiachi is just an example of how "good" that we are. It is uncontrolled but transmutating Mass into Energy effectively.

Seer's picture

Nice to see someone on top of the game :-)  Well stated!

Element's picture

Seer, after sufficient observation of your comments, I do not hesitate to say, you're a simplistic blinkered dickwad, looking down a drinking-straw of dippy theories, at the world around you.

There it is.

Element's picture

er, yeah, like I said first time, "it's all interchangeable" ... last I looked humans have no massless matter ... want some ketchup with that ... or maybe you'd prefer a waffle?

Musashi Miyamoto's picture

Finite world is reality. Problem is infinite expectations.

Par Contre's picture

Our planet may be finite, but the universe is infinite.

rsnoble's picture

Way too optimistic unless aliens come and get us.  Seeing how we can't even get shit straight here after being here for umpteen years forget it.   One things for sure if there was a capsule of some sort any alien race would be wise to destroy it before ever opening it.

TheLoveArtist's picture

We just have to give religion to the aliens and they are going to be killing each other in a few generations anyways

Pay Day Today's picture

If "aliens come and get us", it will probably be for snacks.

Tall Tom's picture

The Universe is an adiabat and is finite. It had a beginning and will perish due to Entropy.


Furthermore we are at the Oldest Point in the known Universe. When you peer into the depths of space you are seeing what was and not what is, or, will be.


An image of a distant star is the evidence that a star existed at that position so many Years ago. The closest star, Proxima Centauri, is 3.2 Light Yers distant. It took 3.2 Years for the Light to arrive. Proxima Centauri has MOVED during that time. It is no longer where it appears to be.


Stars which are more distant have moved in the time that it takes the light to reach us.


As for Galaxies...M-31, The Andromeda Galaxy, the closest large Galaxy is 100 Million Light Years distant. It has moved much closer to the Milky Way as it appears as it is destined to collide with the Milky Way.


Astophysicists see images and NOT Objects. The images can be evidence of an Object's existence but can also be a reflection of another image.


The Universe is like a Carnival House of Mirrors. It is like a Kalideoscope. Most of it is illusion, distorted by the lenses of Dark Matter and Time.


But it does have a beginning and will have an end. Thus it is an adiabat, a limited, closed system.

lewietheparrot's picture

Tall Tom,

You know very well what the scientists say, or----what some say, but

'the universe is'

and there is nothing more to be 'said' about it

'infinity fits perfectly into nothingness'

or so said a very wise man before his death

the finite is our species, although, some would say 'limited' and

 not try to bridge the unknowable from the known or knowable

 and cheney has nothing to do with wisdom

just another parrot like me

thanks for trying to put some earrings on that mule, but

it is still just a mule

Seer's picture

I think that you meant Rumsfeld and not Cheney.

lewietheparrot's picture

Thanks, Seer

But I could never tell the difference between them

I'm sure you must be correct---I can't remember

samsara's picture

Ok, Here's a hammer and saw, and I'll even give you a pair of pliers, Go and get it for us....

Musashi Miyamoto's picture

Go for it. I'm just sayin that we might not have the political and economic willpower to get out there before shit hits the fan and things get really really bad.

stacking12321's picture

political will?

you're not suggesting that the state will be the vehicle of interstellar exploration, are you?

back in the 60s space race, nasa recruited brilliant engineers from the private sector who knew what it meant to create, to innovate. and they acheived great results.

but over time they got absorbed into the behemoth of the state, their souls crushed, their innovation stifled.

what has nasa done since then except launch a few shuttles?

sadly, nasa has become a bureaucratic clusterfuck.

i am all for space travel, exploration, and research, absolutely 100%!

i just don't see the state as being the vehicle through which these dreams come to fruition - the state is an institution of violence and coercion, and they only thing they are good at is enriching the oligarchs, impoverishing the ordinary people, and crushing the human spirit underfoot.

if there is some hope for the frontier of space, it is in the private sector - the x prize, virgin galactic, felix baumgartner, etc. - the human spirit unfettered by the chains of state bondage will soar to the heavens!


Seer's picture

"I'm just sayin that we might not have the political and economic willpower"

And I'm thinking that you don't have a clue about what this means, the realized impact.

If you take energy and resources to do something then that means it's not available for something else- "opportunity cost."  Are you aware that shunting such resources has a cost in terms of LIVES?  Yeah.  But us "wealthier" folks have becom accustomed to being hidden from these realities.

Further, I don't think that you understand the real impacts of exponential growth.  Educate yourself, look up Dr. Albert Bartlett's presentation Arithmetic, Population and Energy.

DaveyJones's picture

like eveything, depends on its definition

cycle of big bangs?

the "stuff" beyond it?


I'll ask God

and then Mr. Gore

SAT 800's picture

This is so breathtakingly stupid; I can't help wondering if it's some kind of competition for stupidist comment on the internet. Who the fuck cares if the universe is infinite? Are you insane?

akak's picture

"Only two things are infinite, the universe and human stupidity.  And I am not sure about the universe."

-Albert Einstein

Element's picture



Dear Sir,

I just want to point out that it's impossible for something finite to contain something infinite.

Therefore, if humans are indeed infinitely stupid, this would by implication be binding evidence that the universe is indeed infinite.

It is a little surprising that Albert did not twig to the ramifications.

As with assuming light speed is a universal constant, we can't test this everywhere, so we must necessarily defer to a Universal Principle which states that always and everywhere human beings will be observed to be infinitely stupid creatures.

Thereby conforming to a workable approximation the under-laying nature and extent of our as unseen deep-cosmos. I suspect we will make great strides if we fully explore this principle's deeper physical implications, though I suppose the limiting factor, even within an unlimited space, will be that the infinite stupidity itself will necessarily frustrate our inquiries.




yada yada yada

Pay Day Today's picture

Uh, stupidity is trans-dimensional.

thestarl's picture

Nothing wrong with stupid people only stupid people who don't realise how stupid they really are.

FredFlintstone's picture

Correct. Without stupid people we would not be so smart ourselves. Stupid people who think they are smarter than they are become annoying (that is the genius of having a red arrow on this site).

Notarocketscientist's picture

Wake me up when you find another earth and you have a free ticket for me.  Until then stop wasting bandwidth ya

zerozulu's picture

Finite world is a problem because Ctrl-P does not print resources.

FilthyPhil37's picture

I think the author has not fully understood that inflation does not effect all commodities equally and can distort the economy by artificially changing [up/down] the prices in specific sectors dependent on who gets the [new] money first. A more correct--natural--distribution of savings would likely balance the use and production of energy, and all other commodities, in a more stable and sustainable way. We may live in cycles, but Ctrl+P magnifies crests and troughs. 

NoDebt's picture

Heading quickly to the way it's been in most societies throughout most of human history:  small number of rich, vast number of poor and just enough middle class to service the rich.

The last century, particularly in the US, will be proven the rare eception to that rule.  One for the history books for sure, but less a daily reality with each passing year.

Skateboarder's picture

And since the victors write the history, King Ben will go down in the textbooks as the leader of the exponential function.

FredFlintstone's picture

Exactly. Since ancient times about 85% of the population were serfs/slaves of the land or to a master. There were some brief periods where some elements of this group saw some relative prosperity and ate well for a generation or two such as after the plagues that caused labor shortages. Our recent housing bubble created a horde or temporarily rich contractors buying boats, Mustang GTs and McMansions.

GS-DickinDaMuppets's picture

"It is surreal how close we can be to limits, without major media catching on to what the problem really is."


WTF, "major media" couldn't catch on to a booger stuck on to the end of their finger...major media -what a joke....

New_Meat's picture

yep-Malthus predicted this ~200 years ago.

Got it -- NYET

- Ned

Soul Glow's picture

We weren't using oil for everything then, dude.

Vint Slugs's picture

Down arrowed you - I'm sure you would have said the same when whale oil was a major energy source.

DaveyJones's picture

Some would say that comparison tells us your comprehension is "crude"

stacking12321's picture

i up-arrowed you for down-arrowing soul glow - he sux!

SelfGov's picture

Millions upon millions have died of starvation since Malthus made that prediction.