God the man´s a twat:
The consequence of which has been hardly any serious discussion about economic growth and sustainability since then. Unbelievable, in retrospect, as even a fool could tell you that if you continue to grow both the number of human beings and the volume of goods and services consumed by each of those human beings, on a planet with limited resources and stressed-out life support systems, then you are heading inevitably for a bust. Sooner or later.
Economic growth is neither described as or counted as an increase in the volume of goods and services consumed….nor even such volume produced.
Economic growth is described as and counted as the increase in the value added to the initial resources.
Thus, as long as technology advances, and new ways to add value to resources is a pretty good description of technology advancing, and new ways of adding value are found then you can continue to have economic growth whatever the limitations placed by the initial resources available.
If the head of the Sustainable Development Commission cannot even grasp that essential point, one that should be well within his intellectual capacity and professional purview, why in buggery are we all forced to pay his friggin´salary?
Has anyone told him that richer people have fewer kids?
Claire Fox, from the Institute of Ideas, did a jolly good job ridiculing Porritt and his ideas on the Daily Politics yesterday.
I think there was a man called Malthus, who….
Wrong, wrong, wrong, wrong, wrong. The planet has limited amounts of stuff. Resources = Stuff x Ingenuity. And ingenuity is unlimited.
Also, the amount of stuff on the planet, though limited, is ever-increasing, as we get bombarded with sunlight.
I would like to believe that human ingenuity is indeed unlimited. However, reading Tim Worstall and the comments on his blog is evidence to the contrary.
Ingenuity sees a problem and solves it (or just maybe doesn’t). Ingenuity doesn’t simply sit there with a smug expression on its face denying there is a problem because “ingenuity” will inevitably solve it. The latter is known as wishful thinking.
If you folks only knew a bit about the history of the national income accounts, you might be able to comprehend that the “growth” Mr. Porritt talks about is not growth in any absolute sense but merely increase of an artificially constructed index, which Simon Kuznets, its developer, warned was NOT to be used as a measurement of human welfare. Kuznets? Who he?
The national income accounts were developed for the purpose of designing state economic planning policies that you reactionary lot would find revolting — roughly the equivalent of Stalinist five-year plans.
Seventy years on and you ersatz laissez faire know-it-alls have your free enterprise wagons statistically hitched to the state planning star! What a joke. The so-called growth you worship has no meaning outside of the state economic planning context!
And glory to Timmy for making up his own definition of what he imagines economic growth to mean. It means just what he chooses it to mean! A nice knock-down argument, there, Tim. Kuznets be damned.
Tim adds: Erm, Kuznets pioneered national income accounting, yes, and one of the things he did was attempt to measure what value was created where. The sum total of that value created being GDP (with variations, GNP, NNP, NDP and so on). I’m hardly creating my own definition here.
Of course, as I say repeatedlçy here and elsewhere, GDP is not a measure of human welfare. But it is a measure of economic capacity, of our potential to address human welfare issues if you like. It’s also relatively easy to measure which is one reason we use it.
As to ingenuity, well, sure, it doesn’t happen just on its own. That’s why I have, just as one example, subsidised research into solid oxide fuel cells. And my company has subsidized research into the extraction of rare earth metals from pre-existent waste streams rather than mining them from virgin ore. Why as a company we are peripherally invloved in research into new alloys for aircraft wing surfaces (which if successful will make planes about 2% lighter. Sounds small but that’s a 2% fuel saving on every flight.) Into new alloys which wouldallow the fuselage to be welded not rivetted. Another 10% weight saving. Into memory shape alloys which will enable jet engines to be both more efficient and also quieter.
Sure, ingenuity means that some people have to go off and try to be ingenuous, try to solve problems. I do that in my day job thanks very much. Do you?
Yes, I do, Tim.
Indeed one of the advantages of GDP is that it is easy to measure. But that ease is also tautological in some respects. It is easy because the necessary data is collected. Decisions about what data to collect are affected by their appropriateness for constructing the national income accounts (see Kuznets’s discussion of the data collection issues from the early 1950s, for example.) And so round and round we go.
Even as a measure of capacity for potentially addressing human welfare issues, GDP is flawed. It is only so under the assumption that current non-welfare enhancing uses of that capacity could be easily transformed to welfare-enhancing ones. You’ve heard the old Soviet joke about the one-ton nail? The state factory managers figure out the cheapest way to meet their production quota is to make really big (and totally useless) nails. Human ingenuity can sometimes be used to game the system rather than solve problems. Or rather the problem solved by the ingenuity can often be wealth appropriation rather than real value creation.
The capacity to produce those one-ton nails doesn’t necessarily translate into a capacity to produce one ton of usable nails. Nor does the rapid expansion of the finance sector translate into a proportionate capacity to produce food or even lighter-weight aircraft wings.
Tim adds: but, erm, this is precisley when GDP is useful. Instead of measuring production, like the one tonne nails, we measure value added. An increase in value added is indeed an increase in economic possibility.
Don’t you get that?
“we measure value added. An increase in value added is indeed an increase in economic possibility.”
No, we don’t, Tim. We measure MARKET PRICES of final goods and services. The value in question is restricted to market exchanges. Don’t YOU get that? You keep insisting you understand the critique of GDP and then you fall back on the same incomplete and erroneous definition.
Tim adds: “GDP can be defined in three ways, all of which are conceptually identical. First, it is equal to the total expenditures for all final goods and services produced within the country in a stipulated period of time (usually a 365-day year). Second, it is equal to the sum of the value added at every stage of production (the intermediate stages) by all the industries within a country, plus taxes less subsidies on products, in the period. Third, it is equal to the sum of the income generated by production in the country in the period—that is, compensation of employees, taxes on production and imports less subsidies, and gross operating surplus (or profits).”
Very good. I would quibble with the PWG definition there to specify that it’s only the realized value added that counts. I suppose they’re taking it as understood that “value” implies a final exchange transaction. But they do specify that it is value added *in production* and that’s a crucial distinction.
Your definition, however, was simply value added. Period. With the corollary that an increase in value added was an increase in economic possibility. So instead of qualifying the definition you aggrandized it. Your corollary assumes precisely the thing that the PWG discussion then goes on to criticize: that the GDP measure doesn’t account for environmental pollution or resource depletion, etc. Thus the “value added” is not some global double-plus-good but is only a localized industrial plus that needs to be reckoned against possible environmental and social minuses before one can answer the question about whether or not economic possibility has been increased. Recall Frederic Bastiat and his distinction between the seen and the unseen.
A fellow name Don Boudreaux once said… Oh, heck, I already used that line. O.K. I’ll make up my own. One of the hallmarks of a sound accounting framework is the ability to look at both sides of the ledger. GDP doesn’t look at the social and environmental liability side of the ledger because it wasn’t designed to. The data there is much more difficult to collect because it deals with costs that are external to the firm. GDP doesn’t even deal with depreciation of capital equipment, something that accounting convention estimates for the firm. I suggest that you go back and have a look at a classic that discusses these matters, John Maurice Clark’s The Economics of Overhead Costs.
Rather than me continuing to do all the explaining and you coming back with glib zingers that you imagine uphold your view, how about we we try something else for a change. You’re a smart guy. You should be able to do a substantive critique of the Prosperity without Growth report instead of snickering over smug Beavis and Butthead gotchas. More exactly, you could do a critique of chapters 4, 8 and 11 — the ones that deal most explicitly with what the report calls the Dilemma of Growth. Say 1500 words. I’m asking you to stretch yourself. But also to expose your vulnerabilities. Or maybe that’s asking too much?
Tim adds: Yes, asking me to write a 1500 word critique is asking too much. I write here for my own enjoyment and elsewhere for money. It’s how I make my living. You’re asking the equivalent of getting the local builder to come around and extend your house…because, after all, he would enjoy doing it for free, wouldn’t he?
“that the GDP measure doesn’t account for environmental pollution or resource depletion, etc.”
Sure, we all know this. I’ve mentioned it many a time right here. I’ve also said many a time that GDP ain’t a perfect measurement for exactly these reasons, but that it’s still a useful one.
“GDP doesn’t even deal with depreciation of capital equipment,”
Sure, that’s net domestic product. The reason we don’t commonly use it is that it is more difficult to calculate than GDP. We know these things. So what? We know them, they don’t have to be spelled out every time the acronym “GDP” is used do they? Gonna be some long blog posts if we do.
On the more substantive matter, what does really piss me off about the report is that they’re half way there to getting it. When they talk about decoupling. If growth in GDP is decoupled from increasing non renewable resource use (that is, we advance technology so that we are adding ever greater value) then economic growth can indeed go on forever. For until we’ve discovered every possible technology there is no limit to said value adding and thus growth.
But while they try to explore this it doesn’t seem to sink in. We still get the statements that unlimited economic growth is impossible.
The glib gotchas are important as well though. Listening to someone telling us how the banking system should be….when they’ve picked up a glaring error from a Polly Toynbee column and think that bank depsoits are the same as bank capital, well, we’re not going to take their expertise on the banking system all that seriously, are we?
Similarly, when he wants to talk about the economic response to climate change but appears not to have looked at the economic models that climate change predictions are built upon….rather calls his expertise into question, doesn’t it?
“they’re half way there to getting it. When they talk about decoupling.”
Actually, Tim, they do get it. Maybe they don’t notice that the get it. The problem with the standard decoupling argument is that it’s decoupling/recoupling proponents are talking about with the recoupling taking place behind our backs.It’s the old Jevons paradox. Decoupling is SOOO successful that it allows us to grow even more than we could have otherwise…
But not entirely. There are some modes of decoupling that don’t automatically fall into the Jevons paradox feedback loop. That qualifying ‘automatically’ is because it is also a question of design.
Presumably you know what those decoupling strategies are better than I do but simply couldn’t be bothered going over, yet again, what everybody already knows.
“getting the local builder to come around and extend your house…”
Well, no. It’s more like asking the local barber or the taxi driver to come around and extend the house after they have been pontificating about the alleged short-comings of a qualified builder.
Tim adds: So now you’re calling Jonathan Porritt a qualified economist are you?
“The glib gotchas are important as well though.”
I hope you’re right, Tim, and we can snicker and smirk our way to peace, prosperity and good government.
What’s Porritt’s qualifications got to do with it? Tim Jackson wrote the report and some of the key analysis came from Peter Victor.
Tim adds: Proof that by this time on a weekend I’m getting confused bewtween two separate reports that have recently come out.