What are the known / alleged problems against using energy as currency?

Question

What are the known (and alleged) problems of using Joules (i.e. a measure of energy/work) as a currency? I tried to find such idea in Google (searched terms like "technocracy", since someone told me that technocracy had such idea), but I'm not clear about where to search in.

(Edit : asked in contrast to fiduciary/trust/faith-based currencies)

(Edit 2 : found this link, but i'm not quite an expert in eco to judge the possible problems, not exposed in the article)

(Edit 3 : This one is my fault since I asked a not-so-clear question, becuase my lack of knowledge. I have to clarify that this proposal is not mine, and I want to just study the concept. In this way, many principles I should enumerate are:

1. Energy taken into account is the "seizable" energy, like solar or fossil.
2. Fossil energy can be stored. Fossil industry would be credited for that.
3. Solar energy can be captured, transformed, and injected into the power network to be credited for that [as currently is, in many countries, right now], and have such energy redeemed later; the only difference with the current situation is that [the modern proposals support that] the economy could be based in such energy, instead the vice-versa case.
4. The exchange act would not involve energy directly, since a wallet of that type could be quite dangerous to carry in the ... ¿pocket?.

In this sense, I think useful answers have already been provided to cover the expressed points, althought I don't want to consider the answer as just-closed, but narrow the extent of the issues I want to understand about).

Answer 1

The problems with using an energy-back currency are probably the same problems as using gold or anything else.

Some of those mentioned in the link (Wikipedia article) include

• Mainstream economists believe that economic recessions can be largely mitigated by increasing the money supply during economic downturns. A gold standard means that the money supply would be determined by the gold supply and hence monetary policy could no longer be used to stabilize the economy. The gold standard is often blamed for prolonging the Great Depression, as under the gold standard, central banks could not expand credit at a fast enough rate to offset deflationary forces.

• Although the gold standard brings long-run price stability, it is historically associated with high short-run price volatility. It has been argued by Schwartz, among others, that instability in short-term price levels can lead to financial instability as lenders and borrowers become uncertain about the value of debt.

• The money supply would essentially be determined by the rate of gold production. When gold stocks increase more rapidly than the economy, there is inflation and the reverse is also true. The consensus view is that the gold standard contributed to the severity and length of the Great Depression.

Answer 2

tl;dr: Energy is one of the worst ideas for a currency that anyone's had.

It's not fungible, it's not a store of value, and has absolutely no scarcity. Let's look at the details.

Commodity currencies are problematic

jmbjera has listed core problems with the gold standard, and with commodity currencies generally: its supply is managed not by a democratically-elected government, but by one industry, so you remove a hugely useful tool from the policy-makers' toolbox; and you expose yourself to very high short-term volatility.

But even amongst commodities, energy has unique issues that make it worse than useless as a currency.

Energy is ubiquitous and bountiful

There's absolutely enormous quantities of it lying around everywhere. One kilogramme of anything contains mind-boggling amounts of energy - $E=mc^2$, right? c, the speed of light, is huge. Squaring it makes it a lot bigger (when we're in SI units). $3\times10^8m/s$ squared becomes $9\times10^{16}$ - that's how many joules of energy in 1kg of matter. Any matter. Soil, platinum, flesh and blood, it doesn't matter, it's all the same amount of energy: 90 Petajoules; aka 25 Terawatt-hours. That's a few weeks worth of electricity supply in Britain. So an energy currency means one kilogramme of sand is equivalent value to sufficient electricity to power that G7 country for a few weeks.

Additional energy arrives on Earth every second of the day

So not only is there immense quantities of energy lying around for free, but vast amounts arrive every second from our friendly neighbourhood fusion reactor, the sun. Irradiation on the earth is about 130 Petawatts. That's about four orders of magnitude more than human energy consumption. Or, to put it another way, sunlight on one ten-thousandth of the Earth's surface brings energy in at about the same average rate as global energy demand.

Energy's value varies hugely in time and space

But it gets worse, as far as currencies are concerned. See, energy's value differs constantly in time, in space and in form. You must have noticed that wind and sunlight are free - no one's charging you for them - and they're energy. Whereas you have to pay for natural gas. You probably pay even more, joule for joule, for diesel or petrol (gasoline). And you will pay a lot more for electricity. On top of that, one unit of electricity has a very different price depending on where and when you buy it, and the quantity you're buying it in.

Energy's form drives its economic value. 1 Joule is rarely worth 1 Joule

Electricity is a really high quality vector of energy: it can do huge amounts of work. But you can only use it in the instant it's generated (ok, you can store it briefly in a capacitor, but that will cost you, too). Heat is a really low quality vector of energy: and the closer the temperature is to ambient temperature, the less work it can do. i.e. the less economic value it has. Now, we've got enough problems with variable marginal values of money as it is, without this scale of problem. The other thing is, if you're storing your currency of energy as heat, it's losing its value every second as it cools off. Yet, at the same time, cooling has economic value, in aircon and in refrigeration. So that's a lack of energy that has economic value.

Many energy transformations add economic value but consume energy

Refining crude oil costs you energy and other resources. And the end product is more valuable, which is why people do it, and make a profit at it. But that would be absurd if energy were the currency.

On sophistry

I've seen the argument for an energy currency before. Usually, when you dig deeper, they're not really talking about an energy currency. They're actually trying to sell something. Typically, but not always, fossil gas. So their proposed energy currency turns out to be something very like gas futures contracts (which have the usual commodity-currency problems: control of supply lies with one industry, not democratically-elected governments; and the whole economy is exposed to high short-term volatility). Now, as we know, we've got far more gas than we can possibly burn (see my colleagues' paper in Nature on this), and the gas industry is starting to get nervous. And so it should. This desparate bid for a "gas currency" is just one more bit of special pleading and rent-seeking from what must become a dying industry.

Answer 3

The concept of using energy as currency doesn't make theoretical sense. Energy alone isn't inherently valuable, it's the energy along with how that energy is expended that makes the energy valuable. The energy is only valuable as long as a mechanism exists to use that energy. Let me provide a scenario to make this more clear.

If you could somehow harvest raw energy in joules into an energy container which could be easily expended, an energy container would be economically similar to a human. Humans are essentially containers of energy. They get this energy from metabolizing food. The energy in a human can be easily used because their bodies are designed to use energy towards moving their muscles, which makes the energy in a human valuable. Whereas the energy contained in a rock (E=MCsquared) is not valuable because it would be so difficult to use that energy. When we pay a human a wage to do a task, such as build a house, we're paying for them to expend their energy towards a specific purpose. In essence, a human is a walking container of energy, and we pay them to use this energy towards different tasks.

Have you ever volunteered? By volunteering for two hours, you are basically giving a charity an energy container which contains two hours of your energy (if you expend 50 kCal an hour, then the energy box would contain 100 kCals of energy at a power of 50kCals an hour).

Since we can see that human labor is inherently valuable, an energy container would be inherently valuable as well. Therefore, having an energy container would be similar to having a person work for you.

But now the issue becomes, what can that human do? What kind of skills does that human have? Humans can expend their energy in different ways. A body builder can use their energy towards contracting their muscles to lift heavy weights, whereas a mathematician uses their energy towards using their brain to process complex problems. So the concept of an energy container is not possible without defining how the energy from that container is expended.

So energy containers would differ in value based on:

• the amount of energy in the container
• the power output of the container
• the means by which energy is expended from the container

So energy containers to be most similar to robots. A robot's battery has a certain amount of energy, the battery has a certain output, and the energy can be expended as defined by the robot (was the robot designed to lift heavy weights, or to process complex simulations?).

So a world where we use energy as currency, in a practical scenario, would be a world where people use robots as currency. And a robot would not make good currency because it is not fundamentally valuable, since a robot is made of many parts such as metals and other raw materials. So even from a science fiction, theoretical viewpoint, this concept does not make sense.

Answer 4

I've been trying to figure this one out as well, I'm almost certain that it's possible to use Energy as a catalyst to drive a new form of currency. Rather than buy/sell goods and services with energy its converted into a type of credit at source. At its most basic level could we not take a Watt and convert it into a Jewel? Its a play on a words but I'm sure a joule is precisely measurable and therefore using a systems such as the IoT and the blockchain protocol we could assign this unit a digital form or hash systematically creating a crypto currency. For example a house has a solar panel feeding into a SMART JAR a type of battery/converter/exchange unit, where a single unit Wxs = J produced is transformed into a jewel. If every household had JAR connected to the internet then we can keep an accurate ledger (blockchain) of currency being produced and exchanged for what goods and services.

I love the idea of Bitcoin and crypto currencies but its not an equal solution and it doesn't re-distribute wealth fairly as those who have invested in huge data servers are mining themselves into the new 1% elite. I believe this idea could give anyone and everyone an opportunity to mine for jewels by just harnessing the energy around them. Its abundant yes but so are dollars its just that a select few horde it all but once jewels are recognized as a form of currency surely its no different from any other type of money a lubrication to ease transactions? I can't think of everything, but I can share ideas. Adz

Answer 5

This is an issue I've considered from many angles for a long time. I'm not an expert and can't say I have all the answers but some things to consider:

1) Everything is a representation of light, i.e. in theory, we're already using light's derivative (e.g. fossil fuels).

We go through locating, extracting, processing, distributing (with countless other bureaucratic steps) to unleash the energy. All of those added steps inflates the volume, but is still fundamentally backed by the release of electrons and photons.

Still, the very act of processing dilutes the value (while creating what are virtual temporary jobs, wealth, and industry). The value must then be recovered by the Consumer converting the stored energy back into kinetic energy and uses it in whatever way.

It's the Foundation upon which the Global Economy is based but very inefficient. Most of the stored energy is lost during the Processes, literally eliminating the value of the commodity!

2) The Value, then, of light is intrinsic, i.e. utilitarian. "Scarcity" is achieved through access to energy collection, distribution, and conversion.

3) An interim economy (which could last 50-100 years!) is created through the gradual transition from a carbon based to renewable energy economy.

I've used solar as the example because it is essentially limitless. Furthermore, wireless transmission from space reduces distribution cost immeasurably.

Still, I see that as the eventual goal (like a fusion reactor) and will require enormous capital expenditures and international cooperation.

Until then, we must rely upon alternative sources to supplement when the Sun isn't shining or the Wind isn't blowing. Geothermal and wave produced energy are great but also require tremendous investment and are not as readily available, especially in the heartland.

I've no doubt we will figure it out but, until then, our partian dependence on fossil fuels will remain which, imho, is not altogether bad. We'll always need the derivatives of petrol conversion, such as oils and plastics, but more importantly they are a back up plan.

In case some unforeseen catastrophe occurs, such as the Sun stops shining, the Moon disappears taking the tides with it, the atmospheric reaches a steady pressure elimination wind, gravity ceases causing water to sit still. Sounds like a movie, huh? Nearly impossible but still good to have a back up plan.

4) The biggest problem (and threat) exists in people's greed and short sightedness. Theoretically, improving the efficiency of harnessing renewable energies would increase the value of the "Joule" (hypothetical unit of energy currency) while expanding its use creates a natural expansion of the currency's supply.

Furthermore, without being able to actually use such energy is negligible without a concerted effort to produce new technologies for every aspect of life! Such a reality creates an opportunity for new and existing companies to transition from carbon based to renewable. Other promising sources, like compressed and liquid natural gas, can serve as a transition fuel from carbon based to renewables.

Improving the efficiency and availability of renewable energies are incentives to continue exploring and improving upon technologies. Unfortunately, there are many who would work vehemently to slow and event prevent such innovations from taking place.

Yet, demand will necessitate supply which is totally opposite the Supply Side Economics of the past three (plus) decades. Many point out that it takes petrol based technologies to produce the means of utilizing renewable energies. That is true but that is a one time (or limited) is investment. No doubt the kerosene lantern was developed to candle light. As it should be-technologies lead to their eventual replacement.

Many also complain about the tax credits and incentives put in place to help make renewables viable. Yet, they conveniently forget that it was, and remains to be, such favorable taxation that has allowed the carbon based economy to flourish!

I fear, until our entire monetary system collapses, cronyism will prevent the natural transition from one source of energy to another. That is all about power: power corrupts and absolute power corrupts absolutely.

Still, there are more wireless devices than there are people in the World and, once satellites beam internet service to every inch of the Earth's Surface, every person on earth with a wireless device in hand will become a consumer.

Of course, it requires easy access to obtain information, awareness of one's freedom, and the Liberty to act upon one's will to be truly free. Consumption requires production, distribution, and maintenance and, if the Free Market is allowed to function properly-as a reflection of people's Free Will-it seems practically inevitable that an energy based currency becomes the Global Standard in the Next Century.

Such a commodity based currency, based upon renewable energy, holds the potential to unite people as never before and be the Greatest Innovation in the History of Mankind after fire. Like fire, it has near perfect application, near limitless scale, and immeasurable benefits for every person in every country. It will allow us to address the shortages in the World and is our means to reaching other planets and beyond our solar system.

The only Question is if "The Power of the Joule" will rest in the hands of All, or in those of only a few. The Answer will be one we all decide together.

Answer 6

There's only two fundamental resources, time and work-capable energy. Everything else can be measured as a function of these. At some point we may have currencies based on them, but in order for energy to be both an effective and safe currency, it will require banning fossil fuels and having extremely efficient storage systems. While the latter is at least on the horizon (Musk's battery factory), the former is unlikely to happen, and without it we would just be handing more power to oil (etc.). Also, not being able to control the monetary supply might be problematic. Or, it might avoid bubbles like the current one. Either way, it takes power from the central gov't, so it ain't gonna happen outside of cryptocurrency in niche applications like powerledger.

Answer 7

https://www.youtube.com/watch?v=H7QlOTi86Nk The best answer gives Patrick Wood: Technocracy Rising