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The Delusion and Danger of Infinite Economic Growth

The Delusion and Danger of Infinite Economic Growth thumbnail

“Fairytales of eternal economic growth.” That’s how climate activist Greta Thunberg depicted the dominant mindset at the United Nations last week. “How dare you,” she said, admonishing them for “empty words” instead of concrete actions to preserve the planet.

She’s right. One of the reasons nations fail to address climate change is the belief that we can have infinite economic growth independent of ecosystem sustainability. Extreme weather events, melting arctic ice, and species extinction expose the lie that growth can forever be prioritized over planetary boundaries.

It wasn’t always this way. The fairytale of infinite growth—which so many today accept as unquestioned fact—is relatively recent. Economists have only begun to model never-ending growth over the last 75 years. Before that, they had ignored the topic for a century. And before that, they had believed in limits. If more people saw the idea of infinite growth as a departure from the history of economics rather than a timeless law of nature, perhaps they’d be readier to reimagine the links between the environment and the economy.

In 1950, the economics profession had surprisingly little to say about growth. That year, the American Economic Association (AEA) asked Moses Abramovitz to write a state-of-the-field essay on economic growth. He quickly discovered a problem: There was no field to review.

Yes, John Maynard Keynes had offered a theory of stagnation, demonstrating the need for government spending to stimulate an economy mired in recession, and Austrian political economist Joseph Schumpeter had studied creative destruction, highlighting the importance of entrepreneurs and innovation. Wesley Mitchell, founder of the National Bureau of Economic Research, had looked at business cycles and others had analyzed monetary forces. But no one had put it all together in a theory of growth. Modern work was “fragmentary” and had “remained on the periphery of economics,” Abramovitz explained to AEA members. Development economist W. Arthur Lewis agreed, noting in 1955 that “no comprehensive treatment of [economic growth] has been published for about a century.”

It was an interesting turn for a field originally quite interested in growth, but convinced it was bounded. The founding fathers of economics—luminaries including Adam Smith, David Ricardo, and John Stuart Mill—shared a belief that growth was finite, and that the reason for limits lay in the natural world. Writing in the eighteenth and nineteenth centuries, they based this conclusion on three observations. First, there was a limited supply of land. Second, all economic processes required at least some products of the land as raw materials. And third, the productivity of the land was subject to the law of diminishing marginal returns: each additional bit of labor and capital added to a plot of land will offer less and less benefit until no more gains are possible. Until the middle of the nineteenth century, leading economists recognized the interdependence of natural and economic systems.

While Adam Smith considered this inevitable slowing of growth to be “dull” and “melancholy,” others were optimistic. John Stuart Mill thought the stationary state would come when there was enough to satisfy human needs, and embraced its arrival, writing in 1848 that it “would be a very considerable improvement on our present condition [with] much room for improving the art of living” when humans could abandon the rat race of endlessly pursuing more. Whether good or bad, the end of growth was a matter of when, not if, for the classical economists.

So when did growth become infinite? If you had to pick a Hans Christen Anderson for the fairytale of eternal economic growth, American economist Robert Solow would be your man. Solow launched modern growth theory with a pair of pioneering articles written in 1956 and 1957. Still alive today, he has done more to shape growth theory than any other thinker.

Like Abramovitz and Lewis, Solow turned his attention to growth in the 1950s because the topic was “in the air.” Calculations of Gross National Product (GNP) had been pioneered during World War II and were spreading across the globe. Fueled by international competition and the reality of robust economic expansion in many nations, growth had quickly become the catchword of the day in economics departments and government bureaucracies.

Solow advanced these discussions with a new model of growth, one that sought to analyze the relative contributions of capital, labor, and technical progress. Whereas Smith, Ricardo, and Mill had taken for granted that land was one of the three factors of production with labor and capital, Solow assumed that land did not matter. To the extent that land or natural resources merited mention (and they rarely did), they could be seen as a sub-category of capital, interchangeable with money or machines.

Ignoring land meant cutting the natural world out of modern growth theory at its inception. Solow wrote that this seemed the “natural assumption” to make in a theory of growth, though he did not specify why. And since in the 1950s, abundant land and resources appeared available, few would have disagreed. Moreover, Solow was a modeler, and the chief virtue of a good model is that it simplifies. A map of a city that included every detail would be as large as the city itself, of course, and of no real use. With bottomless pools of oil in the Middle East, extensive minerals from developing nations, and swaths of farmland available, why clutter a model by including them?

With the rise of the environmental movement in the late 1960s, however, this assumption was called into question. And nowhere was the attack stronger than in the blockbuster 1972 report The Limits to Growth, in which an MIT team commissioned by the Club of Rome argued ecosystem collapse would be the inevitable result of exponential growth. Solow called the report “worthless as science” and “ignorance masquerading as knowledge.” Integrating natural resources into his growth model in 1974, he argued with complex mathematics that “the world can, in effect, get along without natural resources.”

“How dare you,” Thunberg might easily have scolded.

But while readers might imagine Solow to be a laissez-faire fundamentalist beholden to corporate interests, in reality, he was a left-of-center thinker committed to government intervention and planetary protection. He wrote about abating pollution and joined a Sierra Club board. And he scoffed at infinite models: The real world is so complex that to predict more than twenty years into the future is foolhardy, he once told a Congressional committee.

Solow was partly right to critique sloppy thinking among some environmentalists. Limits to Growth did not take account of the ways increased prices or technological advances make new resources available. Nor did such reports account for the fact that from the 1940s to the 1970s, most natural resources did not become demonstrably more scarce. Plus, Solow noted, a no-growth economy could still be highly wasteful. Pollution, not growth, should be the focus of environmentalists.

The specific blind spot in his model was climate change. When thinking about economic growth, he and other economists focused exclusively on inputs to the production process. Would we have enough coal, oil, iron, and minerals to make new goods? With price signals, substitution, and technological change, Solow and his colleagues were convinced we would. But they did not consider outputs—waste and pollution—to be more than a nuisance. They did not imagine that greenhouse gas emissions could be so consequential as to threaten ecosystem integrity in ways that could affect growth.

Similarly, Solow didn’t consider how his ideas would be used by others. His footnotes and caveats showed he didn’t think it made sense to talk about infinite growth. But few people read footnotes and caveats, particularly busy politicians. The easy and convenient takeaway from his models has been that growth can proceed regardless of planetary conditions, and Solow did little throughout his career to correct this misinterpretation.

Perhaps the relative newness of the idea of eternal economic growth can give us hope. In demanding an accounting of growth better suited to today’s problems—one that takes planetary boundaries seriously—we do not need to overturn fixed or timeless laws of nature. As we grapple with the growing dangers of climate change, we can create fresh models and write different stories. That may mean returning to the field’s origins: a time when ideas of growth and the natural world were intertwined.

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34 Comments on "The Delusion and Danger of Infinite Economic Growth"

  1. cam on Thu, 3rd Oct 2019 7:28 am 

    Climate Change, yes, but the clock is also ticking on resources.

  2. print baby print on Thu, 3rd Oct 2019 8:01 am 

    Humans? They applauded her , and they will not do anything. They behaved like she is talking about someone else not about them . Bastards

  3. Sissyfuss on Thu, 3rd Oct 2019 8:02 am 

    It sounds as if Solow was a poor communicator of his theories, or perhaps he gave in to the pressure by the political establishment of the time to not voice any principles that would affect the avalanche of growth occurring at the time. Perhaps that is why only a mind deeply involved in economics has ever heard of the fellow.

  4. REAL Green on Thu, 3rd Oct 2019 8:15 am 

    “We Finally Understand How Destructive Negative Interest Rates Actually Are”
    https://tinyurl.com/y6swxwq9 zero hedge

    “We are slowly starting to understand how destructive negative interest rates actually are. Central banks control short-term interest rates in an economy by setting the rate banks receive on their deposits, that is, on the reserves they hold at the central bank. A new development is the control central banks now exert over long-term rates through their asset purchase, or “QE” programs…Negative interest rates foster the phenomenon of zombie corporations in two ways. First, credit is extremely cheap and in some cases you are even paid to take it (if banks acquiesce to the negative interest rates set by the central bank). Second, because negative interest rates weaken banks by destroying operating margins, they will try to avoid capital losses by extending credit to ailing or even insolvent borrowers. Moreover, negative interest rates kill the incentives to invest in productivity-enhancing technologies by supporting industry leaders, which usually pay lower premiums for loans. As very low or negative rates naturally favour dominant firms, competition is strangled, leading to a fall in overall investment. As a result, productivity growth starts to stall leading to stagnation in the overall economy. This crucial but perverse mechanism has yet to be broadly understood. The backward economic logic of negative interest rates also corrupts the role of time-preference… it is likely to be much more damaging in the economic interactions of everyday life. This is because negative interest rates fly in the face of both economic logic and our innate human sense of rightness. If we must pay to deposit money and to lend, but receive money if we borrow, our economic thinking corrupts. If such perversion continues long enough, it is likely to have far-reaching social and economic ramifications, which we can only guess at the moment.”

  5. REAL Green on Thu, 3rd Oct 2019 8:16 am 

    The negative interest rate phenomenon is part of the path dependency and trap discussion I had yesterday in regards to REAL Green. It is at the very top of what drives global economics of life. It is not like the carbon trap we are in but of course they are both related. The net energy decline of the carbon trap along with climate destabilization, environmental decline, adverse demographics changes, and social decay are fundamental forces now of late stage Capitalism decline. It represents an end game of globalism but it is unclear what kind of end and when it will collapse the status quo. It represents stagnation which is an economic decline force. Lower economic activity combined with higher prices IOW the worst of deflation and inflation. It also represents more income inequality and concentration of wealth which means destruction of the middle economic layer of productivity and consumption.

    Negative rates and stagnation will push socialistic tendencies of money creation for government stimulus if hyperinflation does not get us. This will not be normal socialism because the pie is shrinking. It will be further corrupt wealth redistribution. Real Socialism only works when times are improving and all parties can be lifted. This will lift a few who are connected and the privileged who are close to the money creation. Both late stage capitalism and socialism in the decline phase lead to authoritarianism characterized by dictatorial power, forcible suppression of opposition, and strong regimentation of society and of the economy. It is likely we will see the worst of both in this end game phase. Is that not what we are seeing now? Both will find coercive and corrupt tools to force their change.

    We are path dependent now with global finance which will end globalism. We will go this way because there is no choice. The conditions that got us to and through the 08 crisis now define where we can go. We will never go back to the previous time of economic fundamentals with increasing freedom. To trash the situation more, we have authoritarianism combining with high tech. We have corruption of the rule of law, cold civil wars in leadership, military buildups, MSM corruption, and economic nationalism in trade. None of that is good. Technological advancements is stalling with diminishing returns. There is one area of good and that is the recognition that the whole narrative of better is flawed and wrong but even this partial good is wrong because the solutions that science and academia are pushing are delusional. They want to think we are not path dependent and the carbon trap can be broken out of. This is of course the lie of FAKE Green liberalism of a clean future of affluence and social justice. We then have the delusionals who think space is the next frontier.

    We are in an end game and the critical element for you the individual is where you are at and what you do. There will be destructive forces that will upend life for many in the near term and all of us longer term. Now is the time to prepare and clean out the deadwood of the unnecessary. You will need to be lean and mean for what is coming or go delusional sheeple. That choice should be a no brainer but the reality is people are generally paralyzed with path dependence and traps at their local level. It is hard to know even where to begin to prepare and also how to. The first step should be behavioral with acceptance of failure of the social narrative but also the failure of the solution narrative of FAKE Greens liberals and the capitalist. REAL Green starts from failure and gets to work. Leverage what is left of the status quo to position yourself while you dance along the cliff of collapse in the status quo. The behavior of acceptance of failure will guide you from the seductive lies. Acceptance with a rebirth will require you go through the other 4 steps of the Kübler-Ross model https://tinyurl.com/yyhbgcsg https://tinyurl.com/y37cphpc. Start now and beat the rush.

  6. JuanP on Thu, 3rd Oct 2019 9:46 am 

    If you believe in economists then read this. If you don’t believe in economists I recommend you skip this and do something useful with your time. A fully developed human would ignore economists and the economy throughout his whole life. Wasting time on that is pointless. Just do what’s right! I am so fucking glad that I sterilized myself.

  7. Davy on Thu, 3rd Oct 2019 10:21 am 

    WTF, GED dumbass. Economist provide a vital roll in capitalism. Hate capitalism but it is putting food on your table. Stupid fucks like you whine about them because you are binary finger point low IQ peons. Economist are no more fucked up then FAKE Green delusional scientist and academics who are up on the science until it requires embracing the failure in science.

    Please dumbfuck give us some troll entertainment.

  8. Davy on Thu, 3rd Oct 2019 11:26 am 

    Oops, sorry for getting all triggered and losing my widdle temper again everyone. We all know I take this lame unmoderated forum way to serious like. I need to find myself a hobby or somethin to do with my life.

  9. Davy on Thu, 3rd Oct 2019 11:52 am 

    There you go. The dumbfuck shows his cards. And it is a troll flush. Anyone wondering who the ID theft sock freak is should know by now. Fuck JuanP

    Davy said Oops, sorry for getting all triggered and losing m…
    JuanP said Delusional Davy “Stupid naked comment by the…
    supremacist muzzies jerk said supertard SAW SAWS pbuh swt you stil need to expla…
    JuanP said Delusional Davy “Shut up lunatic. You need t…

  10. Davy Approves this Message via Sock on Thu, 3rd Oct 2019 6:41 pm 

    @ “Davy”

    You qualify as one of the nastiest fucks to ever troll the internet. That’s quite an accomplishment for a spoiled brat born with a proverbial silver spoon implanted at birth.

  11. Davy on Thu, 3rd Oct 2019 6:48 pm 

    poor juanp got his ass kicked today.

    This is all you need to know about JuanP and what his intentions are for this forum and it is from his own pie hole:

    “JuanP on Thu, 30th Jun 2016 4:56 pm
    I think I could use my antisocial, psychopathic, sociopathic skills to convince people to vote for Trump. I can be very convincing when I want and I am excellent at manipulating people.”

  12. Intellectual Nematode Alert on Thu, 3rd Oct 2019 7:40 pm 

    The Delusion and Danger of Infinite Davyskum cut and pasting.

  13. supremacist muzzies jerk on Thu, 3rd Oct 2019 7:53 pm 

    now supertard graem wood SAW SAWS pbuh swt
    is writing a piece about muzzies:

    “His research led to a different conclusion: ISIS is in fact deeply Islamic. Its ends and means are bound up in sincerely held religious belief.”

    supretard SAW SAWS pbuh swt is the author who eviscerated richard spencer SAW SAWS pbuh swt who should be thrown in the muzzie amputation machine and released becuase he’s not a muzzie.

    but since he wrote for the atlantic, libs are going to be paying attention, nah i don’t think so.

    thanks to supertard glenn roberts SAW SAWS pbuh swt

  14. supremacist muzzies jerk on Thu, 3rd Oct 2019 8:27 pm 

    Supertard BIG GOAT NOT pbuh sweet!!!!!

  15. Chrome Mags on Thu, 3rd Oct 2019 9:47 pm 

    Good for Greta for calling out the fairly tale of infinite growth. What she doesn’t get yet, that she will once she’s jaded, is we the regular minions have no power. We can crow and yelp but at the end of the day it’s people with money that determine what direction we go. Fact is we won’t veer from this course unless it’s advantageous economically and there we are again, back to those with money.

  16. JuanP on Fri, 4th Oct 2019 8:05 am 

    I believe that most of what GT says is true, though I don’t know if she is being honest. Her saying these things won’t change absolutely anything, though. People who hope she can make a difference don’t understand both human nature and how late it is to fix this shit.

  17. JuanP on Fri, 4th Oct 2019 8:09 am 

    Kettle? Pot? Black?
    Me thinks you complain too much, Exceptionalist! You should take a break and visit your imaginary goats.

  18. Davy on Fri, 4th Oct 2019 8:24 am 

    Can’t you take a break from the trolling JP for 1 day? Not for me I could give a shit but for the forum. It is pretty obvious everyone is done with it. I didn’t say anything in your regards this morning but as normal you start the shit story.

  19. Antius on Fri, 4th Oct 2019 10:04 am 

    An interesting article by Alice Freedman.

    http://energyskeptic.com/2019/can-concentrated-solar-power-be-used-to-generate-industrial-process-heat/

    Freedman argues that it will be very difficult for renewable energy to replace fossil fuel energy in process heat applications.

    Whilst I don’t argue that it will be more expensive to produce fresh steel and cement using electricity; there is nothing technically difficult about the idea. Nor is it difficult to imagine mining and transport activities powered by non-fossil energy sources, at least in principle.

    What is perhaps disturbing is a recent estimate from Dr Tim Morgan that we are presently spending only 10% of what is needed to replace fossil fuels with renewable energy by 2050. By that point, the quantity of fossil fuel that is economically attractive to mine, will be a small fraction of that available today.

    I am attempting to get an answer out of Tim as to whether the $100trillion required includes all of the energy storage infrastructure needed, as well as the power plants themselves. If it doesn’t, then we are in even more trouble.

  20. Davy on Fri, 4th Oct 2019 10:05 am 

    It’s real hard to think humans can be so stupid.

    Yet, here I am.

  21. Davy on Fri, 4th Oct 2019 10:41 am 

    Like my mama used to say, before she died of alcohol poisoning.

    “Stupid is as stupid gets.”

  22. JuanP ID theft and sock garbage on Fri, 4th Oct 2019 10:53 am 

    FYI, folks, JuanP wants to play today. I asked him earlier to spare you the noise for 1 day but he doesn’t give a shit about anybody but himself. IMA, Richard is one of his multiple personalities.

    Davy said Like my mama used to say, before she died of alcoh…

    Richard Guenette said Money is the root of all evil.

    ..
    Davy said It’s real hard to think humans can be so stupid. Y…

  23. Davy ID theft and sock garbage on Fri, 4th Oct 2019 11:52 am 

    FYI, folks, I wants to play today. You ask me to spare you the noise for even 1 day but I don’t give a shit about anybody but myself. I have multi-polar personalities. And they are all equally stupid, rude and unpleasant. Just like me!

  24. Davy on Fri, 4th Oct 2019 11:58 am 

    My mommy always told me I’d never mount to nothin if I kept wastin all my times surfing the internets.

    Yet, here I am. Waistin my time away.

    I should’ve listened to my mommy.

  25. Harquebus on Fri, 4th Oct 2019 7:48 pm 

    Davy
    It’s not too late and you will not be missed.
    Cheers.

  26. Davy on Fri, 4th Oct 2019 8:23 pm 

    Don’t worry not going anywhere. People like you are part of the reason I stay around.

    See ya

  27. makati1 on Fri, 4th Oct 2019 8:31 pm 

    Antius, do you realize how much electricity goes into just one ton of steel? I worked in a steel foundry that made steel with electric. When they fired up the furnace it took as much electric as the 20,000+ population town nearby to make just six tons. The foundry had its own electric substation.

    1,800,000,000+ tons of steel produced in the world last year.

    Not to mention that that was only the middle of the mining to consumer system. No, we will not be the same when FFs go away. Denial does not change physics.

  28. Davy on Fri, 4th Oct 2019 9:40 pm 

    Bickering with people and lurning how not to get along are important parts of my mental excersises harky. Go pound sand stupid.

  29. Davy on Sat, 5th Oct 2019 12:38 am 

    My, my what I would do for some ebony twink right about now…..

    Issuing H.P. #9 RED ALERT for Cuba, MO Pronto Truck Lucky Stall #9 Glory Hole.

  30. PO.com on Sat, 5th Oct 2019 12:40 am 

    Davy-

    Don’t let the door hit you in the ass on your way OUT!!!!

  31. Davy on Sat, 5th Oct 2019 2:09 am 

    I guess I purdy much worn out my welcome hear, but that won’t stop me from fucking up the place for everybody else. I gots nothin better to do with my time.

    dumbfucks

  32. Cloggie on Sat, 5th Oct 2019 4:52 am 

    Eindhoven promo:

    https://www.youtube.com/watch?v=_46blv4BHOQ

    Eindhoven, one of the least attractive towns in the Netherlands from an architectural point of view, but very attractive from a technological point of view.

    In 1891 it was an insignificant village of a few thousand when the (jewish) Philips family came to town, to found what was soon to be the largest lighting company in the world:

    https://images.app.goo.gl/rhjSqwt9DpacSjT16

    The ties between the Philips family and Eindhoven no longer exists, the city itself is booming like never before, has the most patents per capita in the world and according to Fortune and others has the potential to take over from Silicon Valley.

    The only real bottleneck is the supply of sufficient brains, who are flocking to Eindhoven from all over Europe and beyond. Core activities: ASML IT-hardware machines, Philips healthcare, DAF trucks, university, hightech campus, lots of renewable energy initiatives (storage, solar).

    Economic growth is still very real in Eindhoven.

  33. Peak Oil Ombudsman on Sat, 5th Oct 2019 5:21 am 

    “I guess I purdy much worn out my welcome hear.”

    You got at least this much correct, DavyTurd.

    Give DavySkum a prize he will enjoy- an Ebony Kewpie doll.

  34. papa's cheeseria on Thu, 10th Oct 2019 9:19 pm 

    Great! Thanks for sharing the information. That is very helpful for increasing my knowledge in this field.
    http://bit.ly/2ACUaNM

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