Question

An introduction significance of energy in economics

Answer 1

Some new research and data, reviewed below, has come to light that seems to confirm this essential message. Expensive oil, in other words, does appear to be suffocating the debt-ridden, global economy, just as it is trying to recover (Hamilton, 2011; Tverberg, 2012b). Unfortunately, mainstream economists, including those in government, seem oblivious to the close relationship between energy, debt, and economy, and this means they are unable to see that expensive oil is one of the primary underlying causes of today’s economic problems. Consequently, they craft their intended solutions (e.g. stimulus packages, quantitative easing, low interest rates to encourage borrowing, etc) based on flawed, growth-based thinking, not recognising that the new economics of energy means that the growth model, which assumes cheap energy inputs, is now dangerously out-dated. When growth-based economies do not grow, household, firms, and nations struggle to repay their debts, and quickly things begin to unravel in undesirable ways.

Answer 2

Answer:

The key role of the energy sector in the economic activities of any economy arises because of the mutual interdependence between economic activities and energy. For example, the energy sector uses inputs from various other sectors (industry, transport, households, etc.) and is also a key input for most of the sectors