Substitution of information for energy: Conceptual background, realities and limits

Substitution of information for energy Conceptual background, realities and limits Xavier Chen

The substitution of information for energy is a dominant phenomenon in economic activities. But this substitution is very particular compared to the substitution among factors of production, because information does not have the properties of a factor of production. This article attempts to understand how information substitutes for energy. Keywords:Substitution; Energy; Information P h e n o m e n a such as reduction of fuel consumption in road transport by consulting a map before and during a journey, or increase in energy efficiency resulting from computerization of production processes, are not rare in day to day economic activities. From a theoretical point of view, such phenomena can be considered demonstrations of the substitution of information for energy. Despite the apparent clarity of these examples, information to energy substitution remains mysterious. 'What can we do better than substituting energy - a resource which is rare in western countries, by information, which is quite abundant and practically free in the West?' asked Hawken in his analysis on the current replacement of industrial economy based on energy by a new economy based on information. 1 The mysterious aspects of this substitution are all the stronger since the controversy about the fundamental relationship between information and energy in physics is very much alive. However, if we exclude research work on substitution of transport by telecommunication, the substitution of information for energy is not often discussed in the economic literature. 2 Even Spreng has put it

forward only as one of the possible substitutions among time, information and energy. 3 Hence we remain uncertain about the ways in which information can really substitute for energy. The reasons are partly to do with the fact that the idea of information has not been clearly defined in works related to the 'information society' or in those related to information-energy substitution, and that the links between information and energy have not been properly understood. In theoretical economic analyses, information has, quite often, been mistreated as a factor of production, and as such, its substitution for energy has been dealt with as a substitution between two factors of production. A correct assessment of information-energy substitution therefore demands a rigorous definition of information. In what follows, while referring to our previous work, 4 we shall, first of all, outline the concept of information. Second, we will discuss the conceptual background of the substitution of energy by information, highlighting, at the same time, the differences between information and energy. The text will thereafter demonstrate how the information-energy substitution constitutes a dominant p h e n o m e n o n in the evolution of economic activity. This will be followed by an analytical interpretation of this substitution in economic terms. Finally, we will discuss the limits of this substitution caused by the nonmaterial nature of information. T h e notion of i n f o r m a t i o n

The author is with the Institut d'Economie et de Politique de l'Energie (IEPE), BP 47X, 38040 Grenoble Cedex 09, France, and the Asian Institute of Technology, GPO Box 2754, Bangkok 10501, Thailand.

It is necessary to be precise about what information is, before describing the substitution of energy by information. This polysemic notion often refers to an ambiguous concept. The economists of the 'information society' opposed information and energy as 'good' and 'evil', while leaving aside the question of defining information. 5 Similarly, in citing Wiener's definition of information as 'non-mass, non-

0301-4215/94/01 0015-13 (~ 1994 Butterworth-Heinemann Ltd

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Substitution of information for energy energy, and nothing but information', 6 Spreng did not give a clear definition when he discussed the possibilities of substitution between information and energy: 'we do not know what information is, but we assume it to be everything but energy and time'. 7 Here, we define information as 'what creates or transforms a representation in a relation which links a system to its environment.' This definition is derived directly from the definition of Mackay, for whom information is 'what adds something to the mental model, creating a new representation or changing an old representation of the real world' .8 It encompasses Shannon's notion of information. 9 In fact, even though Shannon did not precisely define information, for him information transmitted by a message is anything that reduces uncertainty in the receiver, where the uncertainty can be measured in terms of binary units (bits). Information: information support

Any material object, whether it is an electric current or a wall, could serve as an information support. But this physical support can never be considered as information itself. Quite frequently, information is confused with its supports: newspapers, reviews, book, electronic signals and computer memories are often wrongly considered information. During the past, information support evolved over time towards a greater fineness, precision and diversity: from pieces of bamboo to modern electronic and optical media, passing through the stage of paper medium. Closely linked to this evolution of information supports was the evolution of coding techniques and of information processing techniques. Today, we code information in digital form and manipulate information in electronic memories using electric currents, instead of transcribing the information directly on to physical objects. But, whatever the support and technique used, information remains what is transmitted and treated in order to form or transform a representation. For example, when we draw a cat on a piece of paper to represent the cat in front of us, the drawing becomes information, and the paper is nothing but its support. In this way, the meaning of the word 'representation' could probably be understood as 're-presentation', insofar as we insist on the object which is represented or described. Information: knowledge

However, the objective of describing an object is to produce or to modify a representation in the mental model of the observer. What we call 'representation' here, is in fact a synonym for 'knowledge'. Informa-

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Informa~

Knowledge

~_~tion

Figure 1. Relationship between information and knowledge. tion is thus the constructing element and, at the same time, the vehicle of circulation, of knowledge. Knowledge is a 'state', and hence the relationship between information and knowledge is like that between 'flow' and 'stock' (see Figure 1). However, the term 'knowledge' implies a sense of truth and certainty, whereas information does not always lead to consolidation of truth or increasing the degree of certainty. Moreover, a representation can also be false. The term 'representation' is quite close to that of 'image' described by Boulding: an individual possesses a certain mental image, at any given time, about his or her surroundings; and it is this image which guides subsequent action.I° Any activity which leads to constructing or changing the mental image of a human-being is an information activity. The forms of acquiring information, as the constructing element of knowledge, can be infinite: from daily individual experiences to organized scientific research activities, going through different forms of learning (by doing, by using, by interacting, by training etc). Information - technique - technology

By definition, information is closely related to technology. 11 Indeed, the mental image of an individual constitutes his or her operational procedure or knowhow in transformation activities. If man is the 'animal who knows how to fabricate tools', what is essential in this fabrication is that man materializes this operation procedure in inanimate objects. Closely related to this notion of operating procedure is that of technique and technology. 12 Essentially, a technique can be considered as 'knowledge of the actions necessary to obtain the desired result', and such knowledge can be obtained by the different forms of acquisition previously discussed. On the basis of this knowledge, science has helped formulate theories and principles which give birth to technology. In addition to the usual definition of technology as the 'entire set of technical procedures and production materials', at least two notions of technology should be distinguished. On one hand, as an academic discipline, technology is 'the scientific reflection on techniques', 13 or 'the rational explanation of technical operations and instruments'. 14 In

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Substitution of information for energy Table 1. Maxwell's demon.

At the end of his book on the Theory of Heat, Maxwell imagined a small and intelligent being, who, placed in a hole in a wall enclosing an isolated gas chamber in thermal equilibrium (maximum entropy), would be capable of seeing the individual molecules and of sorting them according to their speeds without effort. After some time a part of the enclosure will become hotter than others. Thus, without any additional consumption of energy, the entropy of an isolated system diminishes, a situation which is not in conformity with the second law of thermodynamics. According to Maxwell, Carnot's principle would not be valid in the case of information. Having been unable to disprove this puzzle for nearly a century, the physicists named it Maxwell's demon. Brillouin was the first to exorcise it. He identified information as neguentropy, formulated the 'neguentropy principle of information', and generalized Carnot's principle in order to include information.

Source: X. Chen, Information and Energy: The Role of Information Mastery in the Relationship Between Economic Growth and Energy Consumption, PhD thesis, Universit6 Pierre Mend6sFrance, Grenoble, 1993.

this sense, technology is an attempt at explaining techniques by scientific methods, or at reducing the difference between technique and science. On the other hand, as a means of transforming nature to the ultimate satisfaction of human needs, technology forms 'the result of the capitalization of technical and scientific know-how, in material, human and organisational means, to carry out a certain type of economic activity', t5 In this sense, we understand technology, not only as procedures and instruments or as a purely scientific principle, but also as the entirety of scientific and technical knowledge, knowhow and managerial skills. A particular piece of knowledge, by itself, is not a technology. It becomes a technology when it is capitalized by production means. All information activities permitting the acquisition of in-depth knowledge on phenomena being studied, and the realization of their capitalization, contribute towards technological progress. During the last half century, an extraordinary development of a set of techniques referred to as 'information technology' has taken place. This technology, by definition, helps in capitalizing knowledge in technology, while facilitating information activities. In particular, it enables the computerization of the technological means of production, which represents a new leap forward in the natural technological trajectory of a large number of economic activities. 1 Information

- entropy - energy

The relationship between information and energy constitutes the theoretical basis of the informationenergy substitution in economic activities. However,

ENERGY POLICY January 1994

this relationship is not very clear. Certain authors such as Ayres consider energy as a kind of information which can be measured in terms of 'bits', whereas others think that information is a particular form of energy, iv This controversy was initiated by the formal similitude between the formula of entropy developed by Shannon ( H = log2P) in his theory of communication, and that of Boltzmann (S = k logeP) in statistical thermodynamics. These two formulae have been considered as identical by many authors, following the 'Principle of neguentropy of information' put forward by Brillouin in his works exorcising Maxwell's demon (see Table 1). ~s Since then, information and energy (or neguentropy) have been treated as fundamentally the same. Thus, Spreng wrote: 'energy and information are connected at various levels by obvious as well as by subtle relationship', that is, 'information and neguentropy are the same thing at the level of a few atoms or bits. '19 Nevertheless, for us, this information-energy relationship based on the equivalence between information and neguentropy seems false, not only because the term 'entropy' used by Shannon was an exaggeration, but also because Brillouin's 'principle of neguentropy of information' has no proper base. In fact, Shannon hesitated in naming his H function, as he confided to Tribus and Mclvine: I thought of calling it 'information', but the word was overly used, so I decided to call it 'uncertainty'. When I discussed it with John von Neumann, he had a better idea. Von Neumann told me: 'You should call it entropy, for two reasons. In the first place, your uncertainty function has been used in statistical mechanics under that name, so it already has a name. In the second place, and more important, no one knows what entropy really is, so in a debate you will always have the advantage'. 2° To summarize, this argument says 'use a term that nobody knows to gain advantage in scientific debates'; this hardly seems scientific. The identity of entropy in the sense used by Shannon and defined by Boltzmann-Clausius was therefore contrived. Even so, in the basis of Brillouin's neguentropy principle of information, we see, precisely postulated, this identity between the two formulae of entropy. Brillouin reduced these two formulae into one; I = k I n ( P O / P 1 ) , where K can be expressed either in terms of the units of information (bits) or in terms of thermodynamic units (joules/kelvin). But, once the reasoning and examples used by Brillouin as the basis for his theory are closely examined, we see that he has assimilated mental complexities to physical complexities. In effect, in his example of observation of a physical system by an observer,

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Substitution of information for energy

Brillouin assumes that the number of physical complexities of the observed system diminishes after observation. But, what happens in reality is that, after an observation, the number of mental complexities of the observer on the system subject to observation diminishes, whereas the number of physical complexities in the system observed remain unchanged. 21 Therefore, it seems to us that the 'neguentropy principle of information' as well as the 'generalised principle of Carnot' developed by Brillouin, which formed the basis of reductionism of information to energy, is invalid. Hence, information is neither equivalent nor identical to energy. Unlike energy or matter, information is non-material: it is not lost when communicated. Information is not governed by the same physical laws which govern material substances. But this does not mean that information can exist without the help of energy and material. Information and energy have a complementary relationship: a complementarity according to which all information activities necessitate the consumption of energy. It is only in the second stage that these two entities form a relation of substitution which, in theory, is equally based on physics as well as analytical economics.

found significance of the substitution of information for energy should be understood. The substitution of information for energy, when used in its economic sense, consists of putting more information into an economic activity in order to reduce the quantity of energy required. An economic activity which transforms material objects into consumable products necessitates, on one hand, the utilization of technical knowledge relative to this transformation, and on the other, the use of energy, defined here as the 'power required by a material system for it to undergo a transformation, or for it to maintain its physical state'. 23 Besides materials, knowledge and energy therefore constitute the two principal inputs of an economic activity. 24 The incorporation of more and more information into an economic activity allows us to gain more precise knowledge about the objects to be transformed, about the tools and the conditions of the transformation process. In this way information produces a reduction in energy consumption per unit of production, or an increase in the economic value produced by consuming the same amount of energy. This is how the idea of substituting information for energy is realized.

Theoretical foundations of informationenergy substitution

The substitution of information for energy as a dominant fact in economic activities

From the point of view of physics, the substitution of information for energy can be founded on the second law of thermodynamics. Of course, if a system is governed exclusively by the laws of energy, it will inexorably tend towards entropic disorder. Luckily there exist other elements which intervene to thwart these laws. As stipulated by GeorgescuRoegen 'the law of entropy does not seem to apply to the creation of spirit, it indicates us the limits of energy and of matter. This law is not as bad as it appears to be at the first glance. One must know it thoroughly in order to understand its effects. In fact, it gives us a certain liberty', z2 This liberty is undoubtedly due to the fact that the law of entropy does not impose a fixed rate of entropy increase. As a result, we are free to accelerate or decelerate this rate. In fact, its non-material nature gives information a powerful means of reducing the process of entropy degradation, as implicitly demonstrated by Maxwell's demon. The old dream of humanity to create energy ex nihilo and to disprove the principles of thermodynamics is transferred into an action which profits from this liberty granted to us by these universal principles; it is in this way that the pro-

The substitution of energy by information is a dominant fact in the evolution of economic activity. We make the following three observations:

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• the substitution of information for energy materializes in a large number of economic activities, and this happens in all times; • it represents a general tendency in modern technological systems; and • it is a major characteristic of the evolution of the human society over a very long period.

The substitution of energy by information in daily life: a dominant phenomenon in a large number of economic activities The information-energy substitution is based on the idea that a better mastery of information allows the quantity of energy consumed in a given economic activity to be reduced. When we speak of better mastery of information, we mean: • better knowledge possessed by the workers about the objects and the technical equipment employed at work; • better availability of information, coming from diverse sources, followed by a logical and efficient

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Substitution of information for energy

Industrial operation

capacity (Ia) of acquiring and processing information (limited scope of vision, difficulty in treating diverse information simultaneously . . . ) , the quantity of energy consumed (Ea) to fabricate one unit of the product will be considerable. • In the second case (case B), where we install information receptors (on the flows and on the machines) and a calculator which processes diverse centralized information in order to automate this operation, the quantity of information (characterized by the speed of calculation of the calculator) used (Ib) will be greater. With the help of a logical and efficient treatment of this information, the energy consumption of the operation in this case (Eb) could be reduced. • In the third case (case C), we improve the degree of precision of receptors and we replace the calculator by one which is more powerful and has a higher performance with simulation software which permits the processing of ever larger quantities of information (Ic) and the optimization of the operation. This optimization will result in a reduction of energy consumption (Ec).

I J

L

Information processing Figure 2. Schema of an industrial operation. treatment of this information; • a stronger incorporation of scientific and technical knowledge into working methods; • an amplification, by technical means, of human capacity to capture, treat, communicate and stock information; and • a more efficient organization of work achieved by better circulation and better use of information. To illustrate this information-energy substitution, let us consider the following example of an industrial operation which consists of transforming a flow of material inputs into a flow of product outputs (see Figure 2). The influence of information treatment on energy consumption can be illustrated as follows:

We can therefore plot the information-energy relation in this industrial operation as indicated below (see Figure 3). The three cases highlighted in this curve could either be temporal cases, ie the evolution of the same operation in three periods, or spatial cases ie three different situations at any given time. The substitution of information for energy over time can be illustrated by the automation of thermal

• In the first case (case A), it is a human operator who carries out the operation. The operator should c o n t i n u o u s l y supervise the state of machinery and flows in order to control the production process. Due to the limits of his/her Energy

A

Ea

Eb

~C

Ec Et

0

Ia

Ib

Ic Information

Figure 3. Information--energy substitution in an industrial operation, a a E t is the minimum quantity of energy theoretically required in order to realize the same economicactivity.

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19

Substitution of information for energy

"o

Mean Minimal obtained needed resistance resistance

Mean obtained resistance

=o o

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Elemenl;s / to be I / retreatled/

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Tm

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Figure 4. Statistical results on thermal treatment corresponding to the three different situations.

treatment of metallic pieces. The objective of this treatment is to give each piece a minimum mechanical resistance by passing it through an oven for a certain period of time at high temperatures. The mechanical resistance acquired by a treated piece is then proportional to the temperature in the oven and the duration of its passage through the oven. The oven temperature and the duration of passage could then be the subjects of optimization. In the case of a human operator without any regulation, the operator tends to overheat the oven and to keep the pieces in the oven for periods longer than required, in order to limit the rate of rejects. On the other hand, by acquiring information about different aspects of the process (characteristics of pieces, of burners etc) this operation could be optimized resulting not only in elimination of rejects, but also in reducing the average temperature in the oven (from T1 to 72) so that the temperature approaches that which corresponds to the minimum mechanical resistance (Tin). The results of this operation can be illustrated by the curves which represent the statistics of the pieces treated. We can obtain three statistical curves which correspond to the three cases referred to previously (see Figure 4). This substitution of information for energy over time can, of course, be illustrated using several other examples, found equally in the industrial sector (automation and computerization of cement industries), in the transport sector (urban traffic control using the green wave technique, computers installed in lorries etc) and in the tertiary residential sector (tele-supervision of municipal installations, automa-

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tic control and optimization of heating systems etc). For each of these examples which illustrate the incorporation of information over time, we could find another set of corresponding examples which indicate the differences in the incorporation of information by different economic agents at the same given moment. A better example would be that of residential heating systems. Indeed, a heating system without regulators (case A), a heating system regulated according to internal and external temperatures (case B), and a 'smart house' (case C) would correspond respectively to the three cases presented in Figure 3. A heating system which does not use information (case A does not take into account either the variation of the external temperature or the conditions of the building to be heated) could consume ten times more energy to heat the same area than a system which optimizes energy consumption, thanks to the diverse information gathered (case C). A comparative study between two central heating control systems (corresponding to the cases B and C) has been undertaken at the Ecole Normale Sup6rieure de Paris. With the contribution of additional information, the new system of control corresponding to case C permits 30% less energy to be used than in the normal system of control of type B. According to a study carried out by the Electricit6 de France (EdF) in Lyon, a smart house requires only about 15 kW of subscribed electrical load, instead of the average of 35 kW required by a normal house of comparable size, and a smart house need half the quantity of energy consumed to heat a normal house.

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Substitution of informationfor energy INFORMATION ,~%~j/ Symbols / ~

2Z ENERGIE

Figure 5. Evolution of the working object over time. Source: J. Cloutier, 'EMEREC et le mond en . . . tique', Communication et Langages, No 57, 1983. This substitution of energy by information is apparent in all economic activity. To account for the effects of urban traffic control on energy consumption, the French Agency for Energy Management (AFME) carried out studies by successive degradation of the current system in operation in the city of Caen in 1983. The results indicate that with the implementation of controls, the inhabitants of this city saved 1.7 million litres of automobile fuel per year. If a telephone call can help someone to economize on energy, which would otherwise have been consumed in a journey, what would the consequence be of total breakdown of a national telecommunications system? Who would be capable of accounting for such consequences by the same degradation method?

The information-energy substitution at the base of the transformation of the modern technological system The substitution of energy by information forms the basis of the current transformations of the technological system insofar as the latter are profoundly shaped by a general shift away from energy towards information. In this shift we see, on the one hand, an amplification of the technological complexities of machines and production processes and, on the other, an abstraction from working objects given the fact that the development of machines mediates between the worker and the physical object undergoing transformation. Hence, instead of handling the physical objects, we increasingly manipulate symbols. The main object of work is being dematerialized and shifted from material and energy towards information. This happens in such a way that, according to Cloutier, the direction of history has been towards a progressive substitution of 'intellectual and symbolic activities' for 'physical and energetic activities', of 'symENERGY POLICY January 1994

bols' for 'things' and of 'intellect' for 'hand'. z5 This substitution process is illustrated by the changes between two pyramids, where the lower pyramid represents 'the world of things' and the upper represents 'the world of symbols' (see Figure 5). The multiplication of technological complexity and the abstraction from the working object produce a change in the work itself. Work can be considered as a combination of energy and information. When the machine assumes the energy using aspects of work, human-beings are left to provide nothing but information. Human work evolved from the civilisation de la peine (physical work to be carried out) towards a civilisation de la panne (where the main activities are supervision, maintenance, diagnosis and reparation). This has brought a sustained increase in the proportion of workers engaged in information activities (white-collar jobs), to the detriment of manual worker jobs, which are often supply of energy. This profound shift of the technological system, whose origin dates back to the industrial revolution and beyond, has gathered pace recently as a result of the extraordinary development of information technology.

Explosion of new information technologies Indeed, during the last few decades, the development of information has become a virtual explosion: • The speed of calculation of the fastest computer increased from 5000 instructions per second (ips) in 1946 up to almost ten billion (10 l°) ips today; in other words, the speed has doubled every two years. • The working memory of an advanced computer in 1992 reached 256 Mb, whereas it was merely 1 kb in 1970. Today, we are looking forward to memory capacities of the order of gigabits. • This increase in the performance of computer equipment has been accompanied by a reduction in their prices. The scale of this reduction was so drastic that Norat and Minc noted in 1978 that if there had been a similar reduction in prices for the Rolls-Royce, the most luxurious version would today cost only one franc! 26 • This reduction of prices has permitted a massive diffusion of this equipment in all economic sectors. For example, France, which had only a twenty odd computers in 1960, today counts the number in millions. The telecommunications sector, another main branch of information technology, has also experienced the same fast expansion. Today, telecom-

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Substitution of informationfor energy munication networks cover the entire planet reducing the spatial distance, and transforming the whole earth into a 'global village'. Combining computers and telecommunication methods, the field of telematics has also experienced formidable growth. In France, for example, the number of Minitel (telephone information network) units in operation increased by one million per year during the period between 1984 and 1989, and the number of services offered grew at an average rate of 2000 per year during the same period.

Information technology and computerization of production processes Information technology (IT) helps the modernization of technological means of production. This modernization, which makes use of electronics and computer science, includes the increasing capacity of production equipment to capture, treat, store and communicate information. This modernization could therefore also be considered the computerization of the production processes. After mechanization, computerization marks a new stage in the natural technological trajectory of all industries. But this step remains fundamentally different from that of mechanization, which was basically the replacement of human muscles by mechanical instruments; the essentials of computerization lie in the optimization of the production processes leading to savings in energy, capital, work and raw materials. As a new characteristic of the natural technological trajectory over the last few decades, the computerization of technology has penetrated into all industrial sectors .27 In process production industries, manual operations are being increasingly replaced by automatic controls, by centralized information systems, by computer operated installations, and by auto-piloted systems which optimize management procedures. On the other hand, in serial production industries, developments in numerical machine tools, programmable automatons, industrial robots, machining centres, localized industrial networks and flexible workshops are gradually replacing traditional machine tools. The material equipment, instead of being rigid once designed and installed, gradually acquires a greater capacity to collect and store information. This improves, from an industrial view point, its performance, and from an energy view point, its consumption efficiency. Several practical cases could be cited to substantiate this statement. This fundamental shift in the technological system is largely marked by a general tendency towards dematerialization. This was referred to by the economists of technical change, such as Dosi and

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Freeman, 28 as a change in the technological paradigm, a change which replaces an energy and material intensive paradigm with one which is information intensive.

Information-energy substitution at the heart of social development During past evolution knowledge has been acquired and accumulated through information activities. Over a very long period, the substitution of energy by information has played a major role in the evolution of human society. In his article, Spreng drew a triangle linking primitive man, who spends a lot of time and energy in order to satisfy his needs as he lacks knowledge (I=0) to a starving philosopher, who needs lots of time and knowledge to accomplish a task as he does not have adequate energy (E=0) and to an industrial man, who carries out an economic activity in a short period of time (T=0) as he possesses as abundance of energy and knowledge (see Figure 6). 29 Therefore, in the historical evolution which stretches from the primitive man and the starving philosopher towards industrial man, we observe an increase in energy consumption (E), as well as an accumulation and application of knowledge (I). But has this more intensive use of knowledge permitted an increase in the energy efficiency of economic activities? The answer to this question seems to be affirmative when we consider the evolution of the energy intensity (IE) in economic activities over a very long period. 3° In his work on the evolution of the energy intensity of GDP in major industrialized countries, Martin has highlighted the bell-shaped evolution of the national energy intensities, in particular when we consider only commercial energy sources (see Figure 7). 31 From these different curves we can deduce the typical pattern which characterizes the evolution of the energy intensity in a developed economy (see Figure 8). One of the main functions of energy intensity is to indicate the energy efficiency of a national economy. The ascending period of the energy intensity curve (1840-1930 for France) signifies a decreasing efficiency in commercial energy usage during this period. As this seems not to be the case in reality, this bell-shaped energy intensity curve appears incomplete. In fact, to be a reliable indicator of energy efficiency, energy intensity should be calculated taking into account all sources of energy, including those which are non-commercial. The difficulties attached to measurement and conversion of non-commercial

ENERGY POLICY January 1994

Substitution of information for energy

Primitive man (I=0 ; E, T~O)

~

Industrial man (T=0 ; E, I¢0)

Starving philosopher (E=0 ; I, T~O) Figure 6. Triangle linking time, energy and knowledge. Source: D. Spreng, 'Possibilities for substitution between energy, time and information', Energy Policy, Vol 21, No 1, January 1993. energy sources prevent us from carrying out such an exercise. This inability to account for all energy resources forces us to omit certain energy resources which, however, have contributed to economic development in the past. In fact, the ascending period of the energy intensity curve was a period when non-commercial energy sources were being increasingly substituted by commercial energies. T h e r e f o r e , by taking only c o m m e r c i a l e n e r g y sources into account we are unable to indicate correctly the evolution of the energy utilization efficiency of an economic system. For example, when only the commercial energy sources are taken into account, the energy intensity in Japan in 1865 was 0.01 toe/1980 US$1000 as compared to 1 toe/ 1980 US$1000 in the UK. But this does not mean that the Japanese production system was a hundred times more efficient than that of the U K in 1865. If the Japanese consumed such a small amount of commercial energy at that time, it was because they were using other energy sources (wood, muscle force, wind energy, hydraulic energy etc) to carry out economic activities. o

Thus, once we include non-commercial energy sources in calculating the total energy consumption, the bell-shaped long-term energy intensity curve becomes less evident. 32 Acounting for all sources of energy, whatever their nature may be, could therefore result in an energy intensity evolution curve of the shape shown in Figure 9. Such a dynamic proves that, despite the successive usage of different sources of energy, human-beings have succeeded in producing more with lesser amounts of energy over a very long period. One of the major reasons for this reduction in energy intensity is the accumulation of knowledge, which acts as a motor for the evolution of the human society. This tendency to reduce energy intensity results directly from the fact that human society has evolved from the primitive man and from the starving philosopher towards the industrial man. During this evolution, despite the considerable increase in the consumption of energy, we have been able to produce more with lesser amounts of energy thanks to the application of knowledge. Following the logic of this argument, we can say

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Figure 7. Evolution of energy intensity in major industrialized countries. Source: J.-M. Martin, L'intensit6 6nerg6tique de l'activit~ #conomique dans les pays industrialists: les 6volutions de trPs longue p6riode livrent-eUes des enseignements utiles?, Economie et Soci6t6: Cahiers de I'ISMEA, April 1988.

ENERGY POLICY January 1994

23

Substitution of information for energy

e~

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Figure 8. Typical evolution of the energy intensity (t) of a national economy in the developed world. that the idea underlying the Maxwell's demon (ie the improvement of energy efficiency arrived at by increased intensity of use of information-knowledge) is perfectly valid for economic activities (at least up until now). 33 Like the demon, all individuals are bound to be governed by the law of entropy, because, as expressed by Keynes, 'in the long term, we are all dead'. Nevertheless, by using information and building up knowledge, humanity was able to develop itself in a world governed by the principle of increasing entropy. The law of entropy does not apply to information or to knowledge, and therefore, we are not all small 'Maxies' who defy the law of entropy, whose past has been characterized by the accumulation of knowledge, and whose present is governed by information mastery. 34

Economic theory and information--energy substitution Although the substitution of energy by information is an important reality in economic activities, economic theory is not capable of situating this phenomenon correctly in its traditional framework. In fact, standard economic analysis does not enable us to understand any substitution other than

that where the substituting and substituted elements are both factors of production. By a factor of production, the neoclassical theory means something which directly give rise to production. The quantity of the factors used determines the volume of production. Based on the measurability of their quantities in physical or monetary terms, four intrinsic properties of factors of production are identified: divisibility, substitutability by other factors (isoquant curves), complementarity with other factors, and independence vis-g~-vis the others. 35 According to the same theory, two factors of production are substitutable when a given quantity of one can be replaced by an additional quantity of the other without causing any change in the volume of production. 36 The phenomenon of substitution is characterized rigorously by terms such as the marginal rate of technical substitution, the elasticity of substitution etc. The classical example of substitution between two factors of production is that between capital and labour. 37 To produce one pair of shoes of the same quality, the producer can use more labour and fewer machines, or less labour and more machines, so that the two factors can mutually subtitute each other. The technical margins within which this substitution is feasible are limited by the nature of the production. On the contrary, information is neither additive, nor divisible; nor is it easily quantifiable. Because it is non-material, any measure of information based on its physical supports is inappropriate. Information is not independent of other factors, and its applications do not lead directly to the production of material goods. Information is inexhaustible (it is not destroyed by use). As such, we cannot quantify the existing stocks of information as we do the classical factors. All these characteristics prevent us from classifying information as a factor of production, although it is omnipresent and plays a decisive role in economic activity.

O t h e r non commercial e n e r g i e s : powers, muscular

forces

rr" >. I-

o

LU

," Commercial

energy

%

s

1840

1990

Figure9. Evolution of energy intensity over time. 24

ENERGY POLICY January 1994

Substitution of information for energy Electric arc ( B i r k e l a n d - E y d e ) r~ t-.--

Calcium cyanamide

5.0

>E

Haber-Bosch, coke-based 3.0

Elec t ro lyt ic, hydrogen gas

x i ~ of hydrocarbons 1.0,

Natura

Theoretical limit, from CH 4

................ I

1900

I

1920

I

I

19140

I

I

1960

I

I

1980

I

I

2000

Figure 10. Energy efficiency in the technological trajectory of ammonia production. Source: J. Goldemberg,T.B. Johansson, A.K.N. Reddyand R.H. Williams,Energy for a Sustainable WorM, Center for Energy and EnvironmentalStudies, Princeton University, 1985. Consequently, it seems illusory to seek to measure the marginal rate of technical substitution or the elasticity of substitution between information and energy, as certain authors have attemped to do. The substitution of information for energy only occurs in very particular modes. These modes consist of incorporating information in production factors (capital, labour, energy and material) and in combinations of production factors.

Substitution through the incorporation of information in capital (1-> K) The energy consumption in an economic activity is determined largely by capital equipment involved. The incorporation of information in capital is the major force behind the substitution of energy by information in economic activities. Due to the linkage between information and technology, all information activities leading to incorporation of knowledge into capital equipment contribute to technological progress. This knowledge, which is both technical and scientific, and practical, notably concerns the conditions of technological use. By incorporating more knowledge, a technology approaches the optimal theoretical conditions of transformation of matter. This gives rise to increased energy efficiency as illustrated in Figure 10 for the case of ammonia production. For several decades, computerization of technology has been an efficient way of incorporating information into technology. This computerization, as discussed above, marks a new era in the natural technology trajectory of a large number of economic activities, and hence, permits a more efficient utilization of energy through optimization of operations in industrial installations.

ENERGY POLICY January 1994

Incorporation of information technology is effected not only through material investments, where we employ high-performance new equipment, but also through non-material investments such as maintenance, training and software services. It is this incorporation which forms the base of profound transformations of the modern technological system.

Substitution through incorporation in labour (I-> L ) Information is an element of knowledge, and this knowledge is significant, first of all, for man. As the inventor of technology, the operator of machines and the actor in economic activity, man determines all, including energy consumption in economic activities. Given the same machine and the same object to be machined, a competent worker needs less time and energy to perform a job than that needed by a less competent worker. This competence of human labour, generally known as on-the-job knowledge or knowhow, accumulates over time as a result of education, training and experience. Further, competence is increasingly incorporated in machines through mechanization and computerization. Parallel to an intensive incorporation of information in technology, we observe a similar tendency in human labour. This tendency is characterized by abstractions of objects of work, by the increasing qualifications required, and by increasing proportions of employees engaged in information activities.

Substitution through the incorporation of information in organization of production (I-> K + L) Whatever the qualifications of workers, and however modern the machines, if labour is not efficiently organized, there will be waste. Efficient organization can be brought about by circulation and logical

25

Substitution of information for energy

treatment of information. Let us take the example of a group of people trying to displace a heavy mass for a certain distance. The dispersed efforts of the members of this group are clearly less effective than a combined effort in all pulling or pushing the mass in the same direction. But, in order to combine the force of the group, each member has to know the direction in which to pull or push the object. In such a context, it is clear that the quantity of energy required to move the mass a given distance will be much less if the group is well organized and information is well circulated than if organization is poor and information lacking. In reality, we observed that the rational organization of men and machines in a production unit permits a lower consumption of energy for the same volume of production. Similarly, communication among men, machines or both, facilitating a better coordination of economic activities, can tangibly reduce the energy consumption.

Substitution through the incorporation of information in energy (I->E) As described previously, energy is the force of transformation of the material system. In an economic activity, possessing more information on the energy vector results in a better usage of energy. This information permits, in particular, energy resources to be adapted according to needs, an optimization of the different contributions of energy, and better management of energy demand. Energy is multiform. By incorporating more technological knowledge in primary energy, it can be transformed into refined and more efficient secondary energy. Electricity, for example, is high-quality secondary energy. It has advantages such as ease, neatness, and flexibility. According to Shurr, Martin, and David, 38 intensive electrification of workshops in 1920 produced a first reduction of energy intensity (commercial energies) in the major industrialized countries. According to Jaret the usage of electricity in certain end-uses leads to a reduction in primary energy consumption in an economy as a whole, despite the losses incurred in converting other energy sources into electricity. 39

Substitution through the incorporation of information in material (I->M) Material is the object which undergoes transformation in an economic activity. The nature of the material and the knowledge we have on it determine the quantity of energy needed for this activity. In the evolution of material, we note an eruption of new materials which are knowledge intensive, and

26

whose transformation into capital goods, and the functioning of such goods, demands considerably less energy. We can thus economize on energy by substituting metal with plastic, classical materials with new synthetic ones, and vacuum tubes by liquid crystal. Fifty kilograms of optical fibre carries as many messages as a ton of copper wire, while the latter requires 20 times more energy for its production than the former. To summarize, information does not substitute for energy as a factor of production, but via its incorporation in factors of production and in their combinations. The increase in energy prices and reduction in the price of information equipment, the two parallel evolutions seen in 1970s and 1980s, have without doubt accelerated this process of substitution. These particular modes of information-energy substitution are part of the modern productive system, as the incorporation of information in factors of production forms the basis of its evolution. It is from this perspective that we can validate the argument that the substitution of energy by information is a characteristic feature of the transformation of the production system.

Limits of information-energy substitution Information and energy have a relationship of substitution, which has been of major significance in the evolution of economic activities. Yet this substitution is quite particular, as information, being nonmaterial, does not fall into the category of production factors. The incorporation of information into the factors of production and their combinations is the major force behind the current tendency towards the dematerialization of the productive system. During its evolution, human society has consolidated the challenge of Maxwell's demon to the law of entropy, by substituting information for energy. As we observe, this consolidation consists in slowing down entropy degradation by mastery of information. It seems that in the current situation information is abundant. But, since information is not a factor of production, its abundance (which is sometimes called the explosion of information) does not lead to an automatic increase in production; on the contrary, too much information can even harm productivity growth. The question is to know how this abundance of information can be transformed into wealth. There is no easy answer to this question as it concerns a substance which even physicists do not know how to measure correctly. This difficulty of measuring information which we find in physics is repeated in economics. In fact,

ENERGY POLICY January 1994

Substitution of information for energy e c o n o m i c i n d i c a t o r s a r e b a s e d o n a set o f p r e c i s e physical indicators. We weigh agricultural products in k i l o g r a m s a n d p a y f o r w o r k o n a n h o u r l y basis, b u t w e still h a v e d i f f i c u l t y in q u a n t i f y i n g n o n m a t e r i a l s u b s t a n c e s s u c h as q u a l i t y a n d k n o w h o w . Consequently, the dematerialization of economics through the information revolution throws the aptn e s s o f classical e c o n o m i c i n s t r u m e n t s i n t o q u e s t i o n . ip. Hawken, L'(conomie demain, Londreys, Paris, 1985. ZJ.M. Nilles, R. Carlson, J. Roy, P. Gray and G. Henneman, Telecommunications-Transportation Tradeoff : Options for Tomorrow, John Wiley, New York, 1976. 3D. Spreng, 'Possibilities for substitution between energy, time and information', Energy Policy, Vol 21, No 1, January 1993. 4X. Chen, 'The substitution of information for energy in the system of production', ENER Bulletin, No 12, July 1992; and Information and Energy: The Role of Information Mastery in the Connection between Economic Growth and Energy Consumption, PhD dissertation, Universit6 Pierre Mend~s-France, Grenoble, 1993. 5See the works of: A. Toffier, La Troisi~me Vague, Deno~l, Paris, 1980; J. Naisbitt, Les Dix Commandements de I'avenir, a French translation of Megatrends by G6rard Piloguet, SandPrimeur, Paris, 1984; op cit, Ref I. 6N. Weiner, Cyberndtique et Socidtd, Edition Deux Rives, 1952. 70p cit, Ref 3, p 20. 8D. Mackay, Information, Mechanism and Meaning, MIT Press, Cambridge, MA, 1969. 9C.E. Shannon and W. Weaver, ThOorie Mathdmatique de la Communication, Collection Les Classiques de Sciences Humaines, CEPL, Paris, reprinted in 1975. l°K. Boulding, The Image, The University of Michigan Press, Ann Arbor, MI, 1956. 11In the past, technology was often wrongly assimilated to information: see K. Arrow, 'The economic implications of learning by doing', Review of Economic Studies, No 29, June 1962. lZIn literature, 'technique' and 'technology' are often confused. ~3j.-H. Jacot, D. Dufourt, J. Ruffler and L. Bouchert, Automisation: Formes Anciennes et Formes Nouvelles, PUL, Lyon, 1980. a4B. Gille, ed, Histoire des Techniques, La Pl6iade, Gallimard, Paris, 1978. 150p cit, Ref 4, 1993. 16By information technology, we refer to all techniques and know how developed in order to identify, register, process and communicate information. These techniques are of two major branches, namely computer technology and telecommunication. 17R.U. Ayres, Optimal Growth Paths with Exhaustible Resources: An Information Base Model, RR-87-ll, IIASA, 1987; and R.U. Ayres, 'Information, computers, CIM and productivity', in Technology and Productivity: The Challenge for Economic Policy, OECD, Paris, 1991; M. Tribus and E.C. Mclvine, 'Energy and information', Scientific American, Vol 225, No 3, 1971. 18L. Brillouin, 'Maxwell's Demon cannot operate: information and entropy', and 'Physical entropy and information', Journal of Applied Physics, Vol 22, No 3, 1951, pp 334-343; L. Brillouin, La Science et La Thdorie de L'information, Masson, Paris, 1959. 190p cit, Ref 3, pp 15 and 16. 2°Op cit, Ref 17, Tribus and Mclvine, p 180. 21X. Chen, op cit, Ref 4, 1993. 22N. Georgescu-Roegen, Energy and Economic Myths: Institutional and Analytical Economic Essays, Pergamon, New York, 1976. 230p cit, Ref 4, 1993. Zaln calling knowledge by a general term 'information', certain authors, such as Passet and Le Goff, assume that the economic activities put energy and information into action, and hence, that economic development has energy and information dimensions:

ENERGY POLICY January 1994

R. Passet, L'dconomique et Le Vivant, Payor, Paris, 1979; P. Le Goff, ed, Energdtique Industrielle, Vol 2: Analyse Economique et Optimisation des Procdd~s, Technique et Documentation, Paris, 1980. 25j. Cloutier, 'EMEREC et le monde e n . . . tique', Communication et Langages, No 57, 1983. 26S, Norat and A. Minc, L'informatisation de la societY. Rapport au PrOsident de la Rdpublique, Annexes, La Documentation Fran~aise, Paris, 1978. 27The notion of the natural technological trajectory put forward by Nelson and Winter tries to group together all characteristics of technology development which are common to most particular trajectories. Two of these characteristics, namely, the progressive exploitation of potential economies of scale, and the growing mechanization of manual operations, have been relatively well identified in literature. In our previous work (op cit, Ref 4, 1993), we have treated computerization as a common feature of modern technological development; R.R. Nelson and S. Winter, An Evolutionary Theory of Economic Change, Belnap Press of Harvard University, Cambridge, 1982; ot) cit, Ref 4, 1993. 28G. Dosi, 'Technological paradigms and technological trajectories: a suggested interpretation of the determinants and directions of technical change', Research Policy, No 11, 1982, pp 147-162; G. Dosi, 'Sources, procedures and microeconomic effects of innovation', Journal of Economic Literature, Vol 26, No 3, September 1988; C. Freeman, 'The nature of innovation and the evolution of the production system', Technology and Productivity: The Challenge for Economic Policy, OECD, Paris, 1991. 290p cit, Ref 3. Spreng used the term 'information' instead of knowledge. 3°The usage of energy intensity as an indicator of energy efficiency should be reserved for national economies, and to their development over sufficiently long periods. This is because, as a macroeconomic notion, its variation is a result of a set of factors, such as variations of production levels, interenergy substitutions, structural changes in the economy etc. Further, this notion loses its pertinence when comparing energy efficiency in different economic spaces. See J. Percebois, 'Is the concept of energy intensity meaningful?', Energy Economics, Vol 12, No 3, July 1979. 31j.-M. Martin, L'intensitd ~nerg~tique de l'activit~ ~conomique dans les pays industrialists: les Ovolutions de trOs longue p~riode livrent-elles des enseignement utiles?, Economie et Soci6t6: Cahiers de I'ISMEA, April 1988. 32Ibid. 33It is because they do not find the large span of time (about a million years) required by the concept of Maxwell's demon that certain recent physicists consider it unworkable in physics. But, it seems to us that the time span of human civilization is long enough for the idea underlying the Maxwell's demon to be justified; H.S. Left, 'Maxwell's Demon: power and time', American Journal of Physics, Vol 58, No 2, 1990. 34This is the name given by certain authors to Maxwell's demon. 35These intrinsic properties of factors of production are often presented implicitly in all micro-economic manuals, but none refers to them explicitly: see, for example, P. Picard, Elements de la MicroOconomie: Th~orie et Applications, Montchrestien, Paris, 1990. 36Ibid. 37R.D.G. Allen, Mathematical Economics, Macmillan, London and St Martin's Press, New York, 1959. 38S.H. Schurr, S. Sonenblum and D.O. Wood, Proceedings on the Workshop of Energy, Productivity and Economic Growth, Electric Power Research Institute, Oelgeschlager, Gunn and Hain, Cambridge, MA, 1983; op cit, Ref 31; and P.A. David, 'Computer and dynamo: the modern productivity paradox in a not-toodistant mirror', Technology and Productivity: The Challenge for Economic Policy, OECD, Paris, 1991. 39p. Jaret, 'Electricity for increasing energy efficiency', EPRI Journal, April/May 1992.

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