Two hundred and forty years ago yesterday what is considered to be the greatest book on economics was published. This is, of course, The Wealth of Nations. However, one crucial factor that Adam Smith completely missed out of his book was energy. Man’s economic system, a supernumerary of the natural ecosystem couldn’t exist without access to supernumerary energy beyond direct solar radiation. In Smith’s day, if you wanted to build a needle factory or a cotton mill you obviously did so wherever you could find or build a water mill. The saving of human energy is, of course, the fundamental basis of the division of labour but, in effect, energy could then be considered as free.
The industrial revolution would never have happened unless mill-driven factories had not given way almost immediately to steam-engine driven factories. In turn, these, of course, required existing resources of coal which could also be massively extended by the use of the same steam engine.
As Richard Feynman reminded us in his famous Lectures in the 1970s, all physical systems that occur outside the atomic nucleus operate according to the principle of least effort, the surplus of any applied supernumerary energy being expended as waste heat or entropy. The world’s present economic doldrums can’t be explained by anything Smith wrote about but only by the fact that our supernumerary energy sources cannot at present be extended as easily as in the days of water mills and the early steam engines. We could, of course, easily tap into vast additional quantities of fossil fuels in a technical way — if only we also knew how to make vast quantities of consumer goods cheaply enough using methods of least effort (total automation ultimately).