Money Represents Energy

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the infinite monkey's picture
the infinite monkey
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Money Represents Energy

Hey all...

This is my first forum post, I come here from zerohedge where I have given up trying to explain the value of money so I hope some energy literate folks here can ease my lonliness haha. At first I was writing this as a responce to the user "r" post "standardizing on energy" where he/she asks about the feasability of energy credits. This is my response and an explanation of why our monetary profit system is in the state of collapse today.

Money is and always has been a claim on a fraction of the net energy available within an economy. Energy man can neither identify nor quantify without a unit of account to represent it. It is a net energy surplus that allows the production of goods and services for which we use a monetary unit of account to make fair energy exchange. If energy was available in abundance, money as a means of exchange would become completely obsolete.

Monetary units are energy credits, its just semantics.

The problem is not how we choose to name an energy exchange medium, it is the mathematics of profit. Karl Marx explained this beautifully in Das Kapital so I will attempt to explain it based on his work. But what Marx did not realise was that he was in fact describing net energy as objective value a.

First some definitions.


Is the study of the distribution of scarce energy and its allocation to production of goods and services for consumption, or investment into technology/research that produces a net energy gain.

Net Energy Gain.

A net energy gain is expending less energy to acquire another source of energy than is contained in the source to be consumed. Basically, net energy gain (NEG) is just another way to say energy returned on energy invested (EROEI). 


Labor is work performed by human muscle power. In order to perform work we must have an energy surplus which is derived from the consumption of food calories in surplus. This food energy surplus is what labor sells in exchange for an energy medium (money) that can be easily exchanged for a variety of goods and services produced within an economy. 

This is why it is common to read that money (as we know it today) was born from agriculture which provided man with greater food energy surplus. This surplus of energy requiring a medium of exchange in order to trade food energy for other goods and services of value. Goods and services of value that could now be produced in greater quantities once agricultures food surplus freed surplus labor from food production. Also giving birth to profit and thus modern modern civilization and ending primitive communism as the social model. Primitive communism being an egalitarian society in which energy surplus is shared acording to need (think American Indians).


Defined in terms relative to economics today, capital is technology,  information, infrastructure etc. That produces work efficiency greater than that which can be attained via human muscle power alone per energy unit. An ape holding a rock in an extended arm which can be used to crack open a nut shell is capital. The increased angular momentum making nut cracking more energy efficient and thus producing a net energy gain. No different to a farmer with a tractor or a hunter with a rifle today. Man has always been a capitalist. In fact, anything alive in the universe that uses energy efficiency to produce growth is capitalist.


For anything in our universe to grow, whether it is a crystal in the ground or a plant in the rainforest. Growth can only be obtained by either utilizing more energy from available resources (increasing consumption) or by using each available unit of energy with increased efficiency (capitalization).

This definition of growth is extremely important to understand if one wishes to understand why the monetary profit system has no future on planet earth!

Natural capital.

Is capital man cannot produce (such as land) but which is required for the production of energy life must utilize. The sun being the ultimate natural capital to all life here on earth.

Now lets get into the nitty gritty.


As money is nothing but a representation of net energy gains we must produce a net energy gain in order to give the monetary medium actual energy value. In the monetary profit system of energy exchange, this is done by one of two ways.

If the worker, who's labor energy component  is embodied in the production of goods and services, is not equally refunded for his energy expended (monetary income received for his labor), the net energy difference becomes profit to the employer upon sale of the goods and services produced. The employer has produced a net energy gain, a monetary profit.


The owner of production (the employer) compensates the worker fairly for the labor input (monetary/energy income) but adds energy value to the products/services produced. This is done by increasing the nominal monetary value of the product/service (basically, a price mark up haha).

Both means to profit have the same ultimate result. The worker that produces goods and services is also the consumer of goods and services. And as the worker/consumer in a monetary/energy profit system does not receive fair energy income for labor or the goods services produced are exchanged at an increased nominal price (or both).


But we humans are smarter (or dumber?) than this. We conceived of ways to temporarily circumvent the fatal math of profit and we did it through growth. Growth in our population size and growth in our geographic reach. But remember, growth is only possible by two means. Increasing the consumption of energy from available resources and/or increasing energy efficiency per unit energy consumed from such available resources. We did both but as infinite energy consumption and perfect energy efficiency are both impossible, the profit system was always doomed to failure.

The only way to receive an energy income in a profit system is to sell your labor or to own the means of production. But for the labor commodity and the environment, this growth comes at a heavy cost. As the owners of the means of production must be price competitive in a free market, the goods and services must be price competitive. Energy income of the labor commodity is reduced.  New markets must be found for the sale of the products which become unaffordable to a nations consumer/labor base. Greater capital technology is introduced into production which increases energy efficiency over labor which then dislocates more labor from a source of energy income. Products are produced with planned obsolescence. Yada yada yada. I don't think I need to go on.

But one more important temporary trick to maintain growth in consumption and thus save the profit system from implosion was pulled from the hat. Credit was offered to consumers at ever cheaper rates in order to draw from future consumption. In order for this debt to be repaid it requires an exponential increase in the rate of supply of energy to an economy and thus, reduce the nominal price. Today, the world has tapped out our energy reserves. The rates of EROEI in oil, coal and natural gas are all falling whilst demand for energy is increasing.

The only good news is that the profit system has given mankind the technical and information capital efficiency to provide every person on the planet with all the necessities of life and then some. But this will require an end to the profit system and a move towards global energy equality for all. And it will also require the abolishion of propery and intellectual ownership rights. We only have one shot at a future of unlimited human wealth and potential. Once natures endowment of energy dense fossil fuels is consumed, man will never again have the surplus energy required to produce the sustainable energy technologys we require to progress beyond this point.

The profit system is over.


littleone's picture
Status: Silver Member (Offline)
Joined: Sep 24 2009
Posts: 203

Welcome to the forum.

I'll add...the tax system is a huge factor in the profit system.
Taxes are used to milk the poor and enrich land owners.

Land value is a key factor in this economy and directly tied to taxes.

Do the rich subsidize for the poor with taxes, or do the poor subsidize the rich? Check out:

Wanda Sykes On Bailout Stock Market (2:16)

Rich people got it good in this country(USA) ...we refuse to let rich people, not be rich...broke people are going to bail out rich people.

 ~Wanda Sykes  


Ricardo's Law ~ The Great Tax Clawback Scam (7:40)

A wide-eyed look at the progressive tax system.



ashvinp's picture
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Joined: Jan 20 2010
Posts: 412

infinite monkey, I'm pretty amazed that you just wrote this because I'm currently working on an article that is very similar; actually almost exactly along the same lines of your logic. It focuses on the intersection of capitalism (as seen through the eyes of Marx) and inherent limits to complex systems (mainly increasing fragility and finite energy). Pretty crazy, but I'm glad there are other people like you out there thinking about this stuff! I'll be posting my piece here at CM and also my blog ( so be sure to check it out.

littleone, good point about our current tax system. The current debate over bush's tax cuts really annoys me because it completely misses the fact that we need structural reform to our entire system of taxation. I wrote about this here -

cmartenson's picture
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Joined: Jun 7 2007
Posts: 5570

Very good.  We are getting closer and honing in on the same answer from multiple directions; all logic based ones too.

For my part I have taken to understanding the connection between money and energy best through the study of thermodynamics and the works of Georgescu-Rogen.  I personally find it slightly cleaner than a Marxist approach (et al.) as it does not require any inputs or understandings besides the role of energy as the 'master resource' and a crisp defition of wealth (that does not involve money, which is just a representaion of wealth, but not actually wealth).  As a plus, this approach also sidesteps the social justice issues that tend to derail so many people and budding conversations.

But no matter, these approaches all circle the same conclusion which is that the system we have built for ourselves works perfectly well within an infinite system without any boundaries and unlimited energy.  On a finite planet?  Not so much.

The truly remarkable thing, for which an individual alive today can either choose to be grateful or fearful, is that we happen to be alive at a time when, in all probability, the master resource noses over from a net energy perspective and begins a very long glide path back to 'baseline' which happens to be the sun.

Between here and there will be a lot of very interesting territory to cover.  I consider it all to be quite unpredictable in terms of timing and impact.  But it's perfectly predictable in terms of one thing; all complex systems that are starved of energy become simpler.  I am quite certain that our economy will become simpler over time, deliver less prosperity and collective wealth than in the past, and experience a decline in the throughput of energy, resources and wealth.

Many mistakenly interpret this view as bleak or dark, but I see it as an incredible opportunity to live richer, fuller, and more harmonious lives less centered on consuming and other externally supplied sources of comfort.  There's no rule that says less consumption means worse lives except for the false story that's been carefully planted to that effect by Madison Avenue over the years. Trust me, the connection between consumption and happiness is mostly noneexistant and maybe even inversely correlated after the basics are taken care of.

We can choose to approach the future on our own terms or nature's.  It would be a shame if we defaulted to "nature's" simply because we couldn't create a workable monetary system in time.

plato1965's picture
Status: Platinum Member (Offline)
Joined: Feb 18 2009
Posts: 615

 Firstly.. great first post aleph-1-monkey.. :-)

lemma: money represents energy.

theorem:  Peak Oil = ENERGY DEFLATION.

 "Cash" will be king.. your daily fuel supplies.. your daily bread..  the carefully rigged metrics of monetary "inflation" will hide this shift... as you spend more on necessities, the "luxuries" will be squeezed..

 Misallocated energy capital assets like malls, vanity projects, polyester teddy bears, luxuries, will decline in value... - false markets notwithstanding..

 Well allocated energy capital, eg: tools, solid housing, refined metals will do ok... the "digital economy" will do ok. (efficient in terms of utility vs energy)

 Think energy, time preference, and radical revaluation..

 see: Frederick Soddy in the 40's way, way ahead of his time.

jpitre's picture
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Joined: Mar 3 2009
Posts: 366


Infinite Monkey Wrote  "Once natures endowment of energy dense fossil fuels is consumed, man will never again have the surplus energy required to produce the sustainable energy technology we require to progress beyond this point."

Great post -- however I think it is dangerous logic to boldly state "never" - I don't have any special insight into the future, but there are many possibilities in the future that could provide more or less limitless power (aside form the sun)  including nuclear fusion - estimates are that there is enough deuterium to last effectively forever. While not an immediately available source to save us from our current predicament in the near term, enough may survive   to begin a new surplus power dynasty allowing them to repeat our insanity.

Hopefully they will study history and be wise enough to avoid our blunders


ashvinp's picture
Status: Gold Member (Offline)
Joined: Jan 20 2010
Posts: 412
Re: Money Represents Energy

I just finished a piece that fits in extremely well with the excellent points raised in infinite monkey's post -

It doesn't focus as much on net energy, but skips right to the capital this energy is embodied in and traces its evolution through Marx's dialectical processes of capitalism, and also relates this evolution to that of complex adaptive systems. Anyway if anyone is interested please check it out, not trying to hijack this thread or anything.

Here is my post on CM about it -

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