Energy, Vol.124, 100-113, 2017
The economies of speed, KE = 1/2mv(2) and the productivity slowdown
Drawing on basic physics, Kummel [24] and Beaudreau [4,5] attributed the productivity slowdown to the OPEC price-hike-led decrease in the rate of growth of energy consumption in the mid-1970s. The high post-WWII energy use growth rates observed in most OECD countries fell drastically, decreasing productivity and GDP growth. However since, considerable doubt has been cast on this view. For example, why did the rate of growth of energy use in manufacturing, specifically electricity use, fall when and where the price of electricity was either unaffected or increased slightly afterwards? Second, why did it fall instantaneously that is, without the usual lag? Third, why did energy consumption growth rates not return to their pre-1973 level once real energy prices had returned to their pre-1973 levels. Drawing from kinetics, this paper presents an alternative hypothesis, namely that energy demand-related factors, notably the physical limits to energy-based speed-ups, not energy supply-related factors, may have been behind this sudden decrease in productivity growth and hence behind the productivity slowdown. Specifically, in many industries and sectors, maximum machine speed/velocity may have been or was near to being reached in the late 1960s/early 1970s, making further increases physically impossible or not economically viable. (C) 2017 Elsevier Ltd. All rights reserved.