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EROI, ROIIC and The Collapse of Complex Societies

by ARGeezer Sun Dec 12th, 2010 at 10:14:02 PM EST

EROI = Energy Return On Investment. ROIIC = Return On Investment In Complexity†. The Collapse of Complex Societies by Joseph Tainter.

†See excerpts from Tainter quoted below the fold.

In a thread in a previous diary while discussing growth vs. sustainability question arose as to whether an argument being used conflated the issue of economic growth with that of social equity. This issue goes to the heart of the different approaches currently employed in "mainstream economics" and that employed in other social sciences, especially anthropology, archeology and sociology. My response outgrew the bounds I thought proper for a comment and that diary was already unwieldy, so I have made it into another diary somewhat belatedly.

Julian Simon had made the argument, cited by santiago:

-- that there is no reason to presume that human population growth actually be limited by merely linear projections of resource use and availability into the future because people can adapt to scarcity.

I responded:

This apparently makes sense to adherents of Neo-Classical Economics. Perhaps that explains why they deny that financial bubbles occur, that they can be seen as they inflate and that they can be managed in the long term interest of society. A better question just now seems to be if the world economy can successfully recover from the most recently burst bubble.

To others, this "insight" seems more like folly and wishful thinking. Prudence would seem to dictate that we take seriously the pending depletion of the fossil energy resources on which the increasingly complex societies of the last two hundred years have been built. Without access to the highly favorable EROIs that were available until the 1970s, much, if not all, of that complexity could undergo a dramatic collapse in the not too distant future.

The problems for the next two decades are likely to be learning to deal with declining marginal returns on the investments required to provide the energy to drive our cultures. Renewable energy sources provide positive marginal returns. I have seen figures of up to 20:1 for wind. But that may be inadequate to support systems that were built up during times of 50:1 returns.

My fear is that by denying the existence of foreseeable constraints we will run into them very hard and, instead of moving gracefully to a scenario in which we rely on 20:1 returns from renewables, we end up in a near total collapse of the culture. We have to consider that, by blindly following hopeful scenarios and denying the possibility of negative scenarios we could end up needing to rebuild all of our coastal cities on higher ground in a world in which 20:1 returns on investment are the best obtainable. And we could end up having to do that in a social context where a tiny minority possesses almost all disposable wealth and control of the apparatuses of government and has no interest in the survival of the bottom 90% of income earners in the society. But that might get us back to a population less than 10% of what we have today.

To this santiago responded:

There are two arguments being conflated here (and I don't mean just your comment).  One is an efficiency (or growth) argument, and one is an equity argument.

My eventual response is that there are two arguments but they are not so much conflated as co-existent. The Growth/Sustainability argument is not dependent on maintaining equity. In fact decreasing equity would seem to go nicely with decline and collapse, and that certainly was the case with the Western Roman Empire. But then I paused to wonder if perhaps sustainability IS dependent on social equity And on the question of if and how it is reasonable to attempt to separate the economy from the society in which it operates and to disregard the effects of the operation of that economy on the society in which it is actually embedded. Julian Simon, meet Karl Polanyi.


From Tainter, Ch.4, p. 91, (My transcription. No online source available but recently a Kindle version has been made available):

Human societies and political organizations, like all living systems, are maintained by a continuous flow of energy. From the simplest familial unit to the most complex regional hierarchy, the institutions and patterned interactions that comprise a human society are dependent on energy. At the same time, the mechanisms by which human groups acquire and distribute basic resources are conditioned by, and integrated within, sociopolitical institutions. Energy flow and sociopolitical organization are opposite sides of an equation. Neither can exist, in a human group, without the other, nor can either undergo substantial change without altering both the opposite member and the balance of the equation. Energy flow and sociopolitical organizations must evolve in harmony.

Not only is energy flow required to maintain a sociopolitical system, but the amount of energy must be sufficient for the complexity of that system. Leslie White observed a number of years ago that cultural evolution was intricately linked to the quantities of energy harvested by a human population (The Science of Culture, 1949). The amounts of energy required per capita to maintain the simplest human institutions are incredibly small compared with those needed by the most complex....

More complex societies are more costly to maintain than simpler ones, requiring greater support levels per capita. As societies increase in complexity, more networks are created among individuals, more hierarchical controls are created to regulate these networks, more information is processed, there is more centralization of information flow, there is increasing need to support specialists not directly involved in resource flow, there is increasing need to support specialists not directly involved in resource production and the like. All of this energy is dependent upon energy flow at a scale vastly greater than that characterizing small groups of self-sufficient foragers or agriculturalists. The result is that as a society evolves toward greater complexity, the support costs levied on each individual will also rise, so that the population as a whole must allocate increasing portions of its energy budget to maintaining organizational institutions. This is an immutable fact of societal evolution, and is not mitigated by type of energy source.

.... It is the thesis of this chapter that return on investment in complexity varies, and that this variation follows a characteristic curve. More specifically, it is proposed that, in many crucial spheres, continued investment in sociopolitical complexity reaches a point where the benefits for such investments begin to decline, at first gradually, then with accelerated force. Thus, not only must a population allocate greater and greater amounts of resources to maintaining an evolving society, but after a certain point, higher amounts of this investment will yield smaller increments of return. Diminishing returns, it will be shown, are a recurrent aspect of sociopolitical evolution, and of investment in complexity. (Bold emphasis added. Italics from original.)

In the case of The Roman Empire of the West there never was a reliance on levels of energy utilization higher than that of harnessing the power of domestic animals and harnessing wind for sea transport. Social complexity involved differentiated spheres of knowledge and competence including settled agriculture, organized mining, road building, urban water supply and sanitation, a standing army, cheap water-borne transport and a differentiated administrative apparatus capable of performing censuses, surveying land and assessing taxes. In general, the low hanging fruit is picked first. The ability to organize citizen farmers into efficient fighting forces with which to conquer their neighbors combined with the divide and conquer strategy for incorporating the conquered regions into the Empire provided enormous returns on investment in social complexity during the Republic. The government could operate on the spoils of war and the wars more than paid for themselves. But this process peaked under Augustus. Subsequent conquests in the first and second centuries C.E. did not pay for themselves, but the Empire could coast into the second half of the second century C.E. on accumulated wealth. The Empire enjoyed the benefits of the Pax Romana, a large trading area and predictable legal relationships throughout the empire. However, only trade in luxuries was profitable beyond about 100 km from water transport while agriculture provided 90% of the government's revenue. By the time of Marcus Aurelius, (161-180) The governance of the Empire was coming under strain. There was no longer a surplus which could be tapped to meet emergencies. Yet under Marcus Aurelius the empire suffered a plague which reduced population by a quarter to a third and experienced threats from German tribes beyond the Rhine. From Tainter, Ch.5, Complexity and marginal returns in collapsing societies, pp 149-150:

Augustus' successors dealt with financial crises occasionally by selling their capital -- Imperial lands and treasures. This was obviously a limited solution. The more common stratagem was to defer the true costs of government by debasing the currency. This had the politically expedient advantage of shifting to some indefinite point in the future the cost of current crises. The inflation that would inevitably follow would tax the future to pay for the present, but the future could not protest. Viewed from the perspective of history, it is clear that by the time of the Principate, (27 BC – 284 AD), the marginal returns on investment in empire had declined considerably from the level of the later Republic. When the stresses impinging on the Empire grew, it would decline further still. What had once been a windfall had become a burden.

The weaknesses of the Empire that were exposed when Marcus Aurelius confronted the Marcomanni proved nearly fatal during the succeeding crises. The reduced marginal return on organizational investment left the Roman Empire without sufficient reserves to meet such emergencies. The only alternatives were to raise taxes directly, or to raise them indirectly by debasement and inflation. Both courses were adopted. And yet the crises of civil war and barbarian incursions required increased expenditures that yielded no increased return. The Empire was not expanded, no major booty was acquired, and there was no increase in agricultural output. The increased costs of the third century were incurred merely to maintain the status quo. Costs rose precipitously while benefits, at best, remained level. Axiomatically, the marginal return on investment in empire had declined.

By this time additional social investment in complexity were coming to provide decreasing returns on investment and, in the fourth and fifth centuries, they began to produce actual declines of output despite, or because of, the complexity which could no longer be supported. By this time the enormous returns from early conquest had been spent and yet the costs of maintaining the empire remained. There was usually enough revenue to pay for normal activities, but Rome had to spend more than it took in in taxes in the face of plagues and invasions, not to achieve new efficiencies, but just to hold on to what it had. Over the fourth and fifth centuries C.E. the cost of maintaining the complexity on which the empire depended increasingly devoured the very society in which the empire was based. When the costs of complexity could not be borne and provided no benefit over simpler forms of government, the empire collapsed. Life actually improved for many areas under "barbarian" rule -- absent the crushing burden of taxes needed to support the Empire.

Modern society is experiencing similar problems with the increasing costs of complexity and decreasing returns on investment in complexity. Health care is a prime example. Eradicating infectious disease provided a huge return in societal benefit on a rather small investment. Now society is paying huge costs for "lifestyle" drugs and our "war on cancer", while showing results, provides nowhere near as high a return on investment as did the development of the original antibiotics. But we cannot agree that we are spending too much money to extend some lives for a few more years. As a society, we cannot deal rationally with the fact of individual mortality. And this sort of decline on investment in social complexity is occurring in many areas of our societies.

This is bad enough, but we have an additional, serious problem. We have a highly complex society that has been able to develop previously unattainable levels of complexity based on exploiting cheap fossil fuels for energy. And now that we are starting to experience declining returns on investment in complexity we are simultaneously experiencing increasing costs for obtaining fossil fuel energy. So we are being hit with a double whammy. And it couldn't happen to a more enlightened and humane bunch of cultures.

I believe Tainter focuses too strongly on debasement of the currency in the case of the decline of Rome. Marginal return on investment in complexity did decline, but I would propose that is was due to unrecognized factors of political economy. The Roman Empire operated in the interests of the very wealthy, The members of the Roman Senate, local worthies and, of course, the Emperor. Power and wealth flowed to the top. The mob in Rome was feared and placated with bread and circuses, but there was no adequate means of social redistribution. Through the first century C.E. legionnaires could obtain land in newly acquired provinces, but this declined in effectiveness throughout the Principate. Emperors would award money to the people on occasions, but this did not serve to renew the base of the economy. To the extent that there was awareness of this problem, it took the form of nostalgia for the time of the Republic. Had the Emperors implemented changes that would have re-created a thriving small to mid-sized farmer class and would have favored local merchants and handicraft manufacturers, had they found ways for the urban masses to be employed doing socially useful work that enabled them at least to pay their own way and not require bread and circuses, perhaps the Western Empire could have survived considerably longer. In the ancient near east, from Judea to Babylon, jubilees were used to maintain social cohesion. Debt forgiveness on the ascension of a new ruler or at stated intervals renewed the social fabric, providing continuing sources of independent farmers, which provided agricultural production, taxes and a source of soldiers in time of war. Michael Hudson has written on this subject. See THE LOST TRADITION OF BIBLICAL DEBT CANCELLATIONS This demonstrates that wealth redistribution has been employed in complex societies, even in ones that form part of "the Western Heritage"TM Karl Polanyi makes his point on the centrality of culture to productive economic activity by citing Margaret Mead on the effects of introducing a market economy into a subsistence culture, (The Great Transformation, p. 165)

Some who would readily agree that life in a cultural void is no life at all nevertheless seem to expect that economic needs would automatically fill that void and make life appear livable under whatever conditions. This assumption is sharply contradicted by the result of anthropological research. "The goals for which individuals will work are culturally determined, and are not a response of the organism to an external culturally undefined situation, like a simple scarcity of food," says Dr. Mead. "The process by which a group of savages is converted into gold miners or ship's crew or merely robbed of all incentive to effort and left to die painlessly beside streams still filled with fish, may seem so bizarre, so alien to the nature of society and its normal functioning as to be pathological," yet, she adds, "precicely this will, as a rule happpen to a people in the midst of violent externally introduced, or at leased externally produced change...." She concludes: "This rude contact, this uprooting of simple people from their mores, is too frequent to be undeserving of serious attention on the part of the social historian."

However, the social historian fails to take the hint. He still refuses to see that the elemental force of culture contact, which is now revolutionizing the colonial world, is the same which, a century ago, created the dismal scene of early capitalism. [The Great Transformation was published in 1944. ARG] An anthropologist* drew the general inference: "In spite of numerous divergences there are at the bottom the same predicaments among the exotic peoples to-day as there were among us decades or centuries ago...[The anthropologist] recognized that the cultural catastrophe of black society today [1944] is closely analogous to that of a large part of white society in the early days of capitalism. The social historian alone still misses the point of the analogy. [Actually, contemporary social history now very much gets the point, but Economics and Political Science rarely and less so. The more things change, the more some remain the same. ARG] Nothing so obscures our vision as the economic prejudice. So persistently has exploitation been put into the forefront of the colonial problem that the point deserves special attention....Yet, it is precisely this emphasis put on exploitation which tends to hide from our view the even greater issue of cultural degeneration. If exploitation is defined in strictly economic terms as a permanent inadequacy of ratios of exchange, it is doubtful whether, as a matter of fact, there was exploitation. The catastrophe of the native community is a direct result of the rapid and violent disruption of the basic institutions of the victim...

Polanyi proceeds to make the point that the entire history of the transformation in England was a struggle between the Liberals seeking to impose laws and institutions on British society that would suit it to being a market economy and spontaneous self protective opposition to that process by opponents, such as Owenism and the Chartist Movement. Polyani's thesis is that the process of transformation sought to make the society subservient to the needs of the economy instead of allowing the economy to serve the society, and that the success of the transformation, to the extent to which it can be so characterized, is the result of the limitations which were imposed on the transformation project, which if allowed to proceed to completion, would destroy the society in which it was based.

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