The impact of energy on industrial growth

Energy is a fundamental factor of industrial production. The industrial process consists of work performance and information processing, in terms of which the production factors and the output can be defined and aggregated. The equation of growth relates the growth of output Q to the growth of the production factors capital K, labor L, and energy flow E. It can be solved in zero order approximation with respect to time, if one assumes that the characteristic properties of the industrial system are not changed by human creativity and that the economy is far from its thermodynamic limits to growth. Then Q must be a unique function of K, L and E. The integrability conditions result in three differential equations for the elasticities of production. They are solved subject to asymptotic boundary conditions. The integral of the equation of growth with the calculated, factor-dependent elasticities of production yields the production function q = e × exp }}a0[2 − (l + e)/k] + a0ct(l/e − 1){{, with q, k, l and e being the relative values of Q, K, L, and E; a0 and ct, are the two free parameters of the theory. For given factor inputs, the GNP and the output of the industrial sector of West Germany and the output of the sector “Industries” of the United States are calculated for the years 1960–78. Deviations of theory from reality are generally less than 5%. The slump during the energy crisis (1973–75) and the subsequent recovery are well reproduced. The influence of energy prices on factor inputs and growth is discussed. An assessment of future economic developments is given, including a calculation of the impact on U.S. industrial growth of solar power satellites from space manufacturing facilities.