Energy as the Numéraire of any Given Economy
Please cite the paper as:
Olaf Schilgen, (2013), Energy as the Numéraire of any Given Economy, World Economics Association (WEA) Conferences, No. 1 2013, The political economy of economic metrics, 28th January to 14th March, 2013
Economic theories are based on money as the unit of accounting, measuring and exchange. This paper discusses the usage of Energy as a physical characteristic of all commodities, all goods and services as the numéraire for measuring the size of any given economy. Since monetary value is not a real characteristic of the commodities and goods, physical characteristics are real characteristics and therefore they are precisely measurable. This allows measuring a precise physically real GDP in Energy units which represents an exactly metered value in the opposite to the inflation corrected money based ‘real GDP’. Doing so allows redefining the quantity theory as a relation of a given amount of money representing a given and real based physically measurable amount of commodities, goods and services. It allows to explicitly defining the size of any given economy by its amount of energy necessary to create the different kind of capital and consumer goods of any given economy. It also avoids the problem that the existing definition is circular. Measuring an economy by the money used in that economy to define the amount of money circulating in that economy is a circle in itself. Therefore it is impossible to measure an absolute value of any economy since no currency today is defined by a physically existent value. Changing this therefore allows redefining the quantity theory. Doing so also allows defining the Limits of Growth by setting in a given amount of Energy as the available input. Without more energy available for being productively used this sets, describes the limit of growth and gives it a value in physical units.