Thinking about car ownership in the years before the financial crash, I reasoned that there were two groups of people who fared best. The first were those rich enough to buy brand new cars. Although they lost on the rapid decline in the re-sale cost of the car, the price was worth paying because the warranty insured them against any faults or breakdowns that might occur. In addition (in the UK at least) new cars are not required to take MOT tests and insurance tends to be cheaper. So long as you could afford to keep trading in your car for a new one every three years, you could expect to enjoy breakdown-free happy motoring. The other smart group, ironically, were those at the other end of the life of a car – people who paid a couple of hundred pounds for an old banger with 10 month’s MOT (which the seller swears is legit) and an awful lot of duct tape holding it together. Since any breakdown that does occur will cost more to repair than the car is worth, it can simply be scrapped and replaced with another old banger.
The true suckers in the game of car ownership, then, are the majority of motorists who buy the nearly new cars just at the point when the warranties have run out and the breakdowns begin to appear. The problem here is that the amount invested in the purchase of the car, together with its still relatively high re-sale price, makes it something of a money-sink when problems arise. Even the niggling annual service costs and repairs required to get through the MOT test can run into several hundred pounds. Anything more serious can quickly run to thousands. Nevertheless, most motorists in this category are loathe to scrap the car and walk away.
“Do you have a suit or dress in the closet that you haven’t worn for years but you are reluctant to get rid of it? You say, ‘I can’t throw that away because I paid good money for it?’ Or you have magazines and books that have been accumulating in your crowded apartment but you won’t discard them because you say, ‘I’ll get around to them some time when I have the time?’ Or you might find yourself in a dead-end relationship but you say, ‘I can’t give it up because I have already put in three years and I have to make it work out?’ You justify ‘riding a loser’ or getting stuck on what you already have because you fear that walking away would mean that you wasted your time or money, you made a mistake, people will now say, ‘I told you so’, or you will then conclude, ‘I must be bad at making decisions because this one didn’t work out’. If you recognize any of this in yourself then you are suffering from commitment to sunk costs. You are trying to recover your investment by holding onto it because you cannot accept it is no longer working.
According to Leahy there are four psychological reasons that drive humans to this form of behaviour:
- Fear of waste (of time, effort and money)
- Reluctance to admit a prior mistake
- Avoiding the psychological pain of letting go of the sunk cost
- Failing to see a positive alternative.
Were this just an issue concerning the purchasing of clothing, magazines or cars, we might dismiss it as just another of the (many) psychological quirks that afflict humans. It turns out, however, to have major implications for humanity’s future; because the same phenomenon can be found all in far bigger spending decisions. To give a famous example, the Hubble space telescope – which was planned to cost around $400 million – ended up costing nearly $5 billion to build. Having launched it into orbit, however, scientists discovered that its mirror was the wrong shape; rendering it more or less useless. Having invested so much in building and launching it, however, simply leaving it to join the mountain of space junk that humans have already left in orbit was out of the question. And so various work-arounds were used to get it to function which, when added to the routine maintenance costs brought the final cost of Hubble up to around $10 billion.
More mundane examples can be found with the critical infrastructure on which a modern industrial society depends. Computer engineers have long understood that the entire global banking system needs to be shut down for perhaps a month in order to bring in entirely new software. Nobody dare do this, of course, so the engineers are obliged to keep patching software that is written in code that died out in the 1980s. The result is that every time a bank attempts to update the software, their system crashes; seriously disrupting economies that depend on instantaneous 24/7/365 banking.
Less obviously, human institutions break down in the same way. Education, health and social care, and social security and pensions systems designed for the expanding industrial economies of the 1950s and 1960s are increasingly unfit for purpose in the energy-constrained early decades of the twenty-first century. The misallocation of resources to expand university education – increasingly funded by graduates themselves via student debt – was based on the vacuous assumption that the future will be like the past; only bigger. Instead, university graduates struggle to find genuine degree-level employment even as the wider economy faces shortages of technical skills. In a similar way, health and social care systems set up to tackle the relatively simple diseases that used to disable a sizeable part of the population in the early twentieth century; have morphed into hi-tech treatment centres for a host of complex conditions affecting people much older than the Biblical three score years and ten (70) that used to be recorded as “old age” on death certificates just a few decades ago. Meanwhile, social security systems designed to provide pensions to older workers for a couple of years at the end of their lives are instead drowning under the weight of a baby-boomer generation that refuses to die at its appointed time; but continues to vote in large enough numbers to prevent a reform of the system. Instead, governments resort to attacking the much smaller safety nets provided to unemployed, sick and disabled people; who can be demonised as scroungers and shirkers.
If we were starting with a blank sheet of paper, neither the National Health Service nor the fossil fuel-powered National Grid (as inherited) would be considered sensible. Nevertheless, prior investment and psychological attachment prevent us from starting again from scratch. Instead, we employ ever more complex (and expensive) work-arounds in an attempt to make systems, institutions and infrastructure achieve things that they were not designed to do (such as keeping people alive into their 90s or providing 24/7 electricity using solar panels).
The irony, though, is that while the work-arounds across the entire system cost ever more in energy and monetary terms, individual components end up starved of resources. Infrastructure is left to decay even as infrastructure spending increases remorselessly. Reforms aimed at cutting the social security bill end up costing billions of pounds without lowering the full cost of social security payments. Carrying out repairs and maintenance on the cheap appears to save money… until a crisis point is reached.
The 2017 Grenfell Tower fire was a classic example of this. Using cheaper grade cladding (which, by the way, was common throughout Britain) appeared to save on refurbishment costs. However, the tendency for the cheaper materials to catch fire meant that when disaster finally struck, the costs were huge. Not only are the managers of the tower facing fines and possibly prison sentences; but they will be required to rehouse the surviving residents and (ultimately) compensate them, as well as either rebuilding or clearing the property. Furthermore, local authorities and housing associations across the UK have been saddled with a huge bill for replacing the cladding on hundreds of other properties… all in all, a far higher cost than would have been incurred if they had used appropriate materials to begin with.
The Boeing 737 Max calamity is another example. Competition in the air industry is cut-throat. One consequence is that demand for lean-burn engines – which are slower and larger – has increased. Boeing’s competitors addressed this – at considerable cost –by designing entirely new aeroplanes around the new engines. Boeing, in contrast, attempted to keep costs down by retrofitting the existing and antiquated 737 to take the new engines. The result was a cheaper, but dangerous, aeroplane that required computer software to correct its tendency to stall. Ironically, the cost of updating the plane so that it no longer kills its passengers, together with the losses resulting from regulators banning it from flying, far outweigh the initial savings.
Nor is it just bad management and cost-cutting that creates problems. The second law of thermodynamics takes its toll anyway in the form of entropy. In common sense terms, the longer something has been around, the more it tends to decay. Of course, preventative maintenance and repair can slow the process; but it cannot be reversed. Bridges, roads, railways, docks, oil refineries and national electricity grids all suffer the same problem. Many were built in the years when western economic growth was still high. As Mark Brown from Amey Consulting explains:
“As the sheer number of assets required to support our increasingly complex society grows, so we need to give greater priority and funding to maintenance and intelligent management of our infrastructure. We also need to recognise that the intellectual and technical challenge of managing assets, while maintaining an adequate level of service on our highways, railways and waste systems, is at least as demanding as that required to build greenfield [i.e., new]infrastructure.
Here, however, we suffer from the “royal ribbon problem” – the built-in preference to invest a large amount of energy and money in the development of entirely new infrastructure at the same time as repair and maintenance budgets are slashed. Consider, for example, the costs of the Champlian Bridge in Montreal:
As the Office of the Auditor General of Canada reported last year:
“Starting in the 1980s, concerns were raised about the bridge’s deterioration, and important structural issues were noted between 1999 and 2004. However, we found that it was only in 2004 that the JCCBI [Jacques Cartier and Champlain Bridges Inc.] developed a financial indicator and target to monitor life-cycle costs for the existing bridge…
“It was difficult for the JCCBI to appreciate the increasingly rapid deterioration of the existing bridge because it could not determine what was happening inside the bridge girders. It did not fully realize the situation until the 2006–07 fiscal year, when the bridge was in urgent need of unexpected major repairs…”
Even when new infrastructure is built, the costs can still be high; as the Scottish Government discovered last year. According to Andrew Nicoll at the Scottish Sun, despite the opening of the new Queensferry Crossing:
“Taxpayers coughed up £22.7million maintenance costs for the [old] Forth Road Bridge in the year since its replacement opened. The huge sum came despite the structure being used by only 700 vehicles a day — the equivalent of almost £90 per journey…
“Figures released under freedom of information show repairs of £22,697,049 despite the bridge only allowing access to buses, taxis, emergency crews, farm vehicles, cyclists and mopeds. Traffic samples from February 6 to June 12 showed an average 696 vehicles travelling the 54-year-old crossing in a single day.”
Both failing to repair and repairing beyond shelf-life have a similar, Seneca cliff-like impact in the end. Over time the cost of repair and maintenance increases either through neglect or entropy. Ultimately, all built infrastructure is akin to the old banger that should be scrapped and replaced. Nevertheless, the cost of scrapping it is often too big to bear; and so good money (and time and energy) is allowed to follow bad until the day when collapse cannot be stopped.
This problem raises more profound questions about the way we think about energy return on investment (EROI) and Net Energy. The original EROI calculations based on the amount of energy (in barrel of oil equivalent) required to produce a barrel of oil at the well head were useful to compare the cost of different oil fields. However, they tended to ignore a lot of the embodied energy required to invest energy in the first place. Moreover, while calculations at the well head are useful, from an economic perspective, it is energy at the point of use that matters. And again, getting a barrel of oil from the well head to the point of use requires even more embodied energy in the trucks, pipelines, railways, tankers and refineries… all of which requires regular repair and maintenance to slow entropy; and all of which will collapse in the end.
Net energy calculations have attempted to broaden the discussion by separating the energy required to keep energy flowing, compared to the energy available to the wider society. As the energy cost of energy increases, so the amount available to run the economy falls. This results in a scary Seneca cliff of its own:
But even this does not give the complete picture because it overlooks the impact of entropy. Since much of the built infrastructure that allows us to extract/generate and productively use energy was built decades ago, it creates a growing drag on the energy available to run the economy; as a growing proportion of the energy available to us has to be diverted into repair and maintenance. Worse still, replacement costs are even higher. Whereas, for example, a power station might require hundreds of thousands of pounds in maintenance in a year, this is a tiny fraction of the billions of pounds required to build a replacement.
One reason the UK’s coal power stations are closing early is that the coal ban due to come into force in 2025 provides an artificial cut off point beyond which the revenue stream will be cut. Rather than wait for 2025, however, most generating companies have chosen to cut their losses as maintenance costs rise. Just like the owners of clapped out old bangers, the owners of coal power stations no longer wish to throw good money after bad.
The underlying problem that this hides, though, is that a large part of the UK’s generating capacity – including much of its nuclear fleet – was built in the 1960s and 70s and is coming to the end of its life. And thus far, neither the private nor public sector is keen to stump up the billions of pounds needed for replacements. Only one of the UK government’s three planned new nuclear plants is going ahead – and even this will severely test the ability of UK bill-payers to meet the additional costs that have been added to energy bills.
This – probably impossible – replacement infrastructure is not factored in to simple net energy calculations. It is, however, an essential part of the infrastructure that allows energy at the well head to be transformed into useful exergy at the point of use. However, given that – in the broad sweep of the oil age – entropy is bringing us to infrastructure failure just at the point that the energy cost of energy is rising to critical levels; far from falling off a net energy cliff, complex western economies are likely to find themselves caught in the jaws of a net energy pincer:
This suggests that the number of things that we know how to do in theory but can no longer do in practice (like sending humans to the moon, operating commercial supersonic flight or even running automated car washes) will explode in the course of the 2020s. Unfortunately, if past experience is anything to go by, the level of denial and techno-utopian fantasising will also increase… at least until the collapsed and decaying infrastructure of a by-gone age is visible for all to see.
As you made it to the end…
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