Production function with electricity consumption and its applications

Researchers have tried to track the pattern of economy activities for decades. Cobb–Douglas production function has been adopted for almost one hundred years, while modern economists tend to analyze the economy via the aspect of individual agents. A different perspective of reviewing Cobb–Douglas function is needed. This paper finds a closer relationship between electricity consumption and economy, which can be represented via a strong similarity between four characteristics of “genes”. A second finding is that countries after post-industrialization should enter the phase of up-industrialization, which largely focuses on technology accumulated value added for the secondary industry. Case study in this paper illustrates that the U.S. is entering the up-industrialization period. Countries that deemphasize on technology innovations will sooner or later result in severe economic consequences or financial crisis. This paper also initially encourages the wide application of smart meters and integration of smart grid to obtain timely and accurate data of electricity consumption to observe unusual economic activities.