Tuesday, December 11, 2018

Small Bypass.

Since the issue of actual size of economies was raised in previous post, I might as well remind everybody that production and consumption of energy is one of those very real metrics which testifies to the size of actual economy. Since it is not easy, at least for me, to find latest free data on energy consumption and production, we may as well use Wiki here with data for 2014. Obviously it is still not precise metric but it, nonetheless, is very indicative one. Here is some data in British Thermal Units (BTU).

United States: produces 82 quadrillion BTUs, consumes 98.3;
Russia: produces 55.3 quadrillion, consumes  30.7;
China: produces 91.97 quadrillion, consumes 119.5;
Germany: produces 4.44, consumes 13.1;
India: produces 15,52, consumes 24.3;
Saudi Arabia: produces 27.6, consumes 10.3. 

So, one can make some very approximate (number of times or folds) economies roughly correlate (or have ratio) with, of course, adjustments for climate (e.g. air conditioning is very expensive in hot countries, while heating varies dramatically with climate zone), industry's energy efficiency (some nations still use old traditional melting technology in steel industry etc.). But generally, if you take a look at US energy consumption dynamics here, you will notice a peculiar thing--industrial consumption remains basically unchanged in the last 4+ years. Nations that realistically grow they do increasingly consume energy in their manufacturing sectors--it is an axiom, even when adjusted for modern energy-saving technologies--not the case here. Do the spread, say, from 2007 to 2018 (there is a function for that) and see for yourself. 

So, here is a rough estimate, if we count PPP of Russia and Germany the same (they are virtually the same--roughly 4,1 trillion) and adjust them for energy consumption it becomes clear that (very-very roughly) US and Russian consumption relate as 98 to 31 which is roughly 3.3 to 1, which, accounting for the US being slightly more than two times larger in terms of population than Russia, one gets Russia's PPP GDP of 4.1 Trillion multiplied by 3.3 = 13.53 trillion which gets us in the very rough vicinity of US real GDP. This number is what the US actually produces and it is funny how this very rough ratio of something 3.0-3.5-4.0 pops up periodically in the costs of many weapon systems. Forestalling the argument of US, indeed, having higher wages it has to be also stated that life in Russia, in the same time, is much much cheaper. So, here is a fast, one of very many, adjuster, which doesn't fit Western economic "science" but which allows to get a slightly sharper picture of the world. More precise picture? Well, read my Why Math Models Fail posts and, hopefully, new book when it comes out.

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