Basics Here, Basics, They Do Matter

I have heard it said that only the mad and economists think that perpetual growth is possible in a finite world.

Kenneth Boulding but still.

(Chart of rise in GDP per capita.)

Is that growth mad?

Is it unreal?

Is it unsustainable?

Is it time economics realised that this cannot continue and ask, in stead, what else is possible?

The answer to all four is yes.

At which point we need some basics. What is GDP? It is the value added in the economy over a set period of time.

Is adding more value mad?

Is adding more value unreal?

Is adding more value unsustainable?

Does economics need to realise that this cannot continue and instead ask what else is possible?

The answer to all four is no.

Consider this for a moment. The next argument – we can see this one coming down the pike from a mile away – is that instead of increasing GDP we should be trying to increase security, or love, or community because these add real value to our lives. Sure, so, we’re increasing value then, right?

But then Spud never has bothered to find out what economics is trying to tell him, has he?

17 thoughts on “Basics Here, Basics, They Do Matter”

  1. Sounds like a Democrat campaign ad:

    “What else is possible? YES!”

    “Replace the police with love!” – Colin Kaepernick

  2. The world was just as finite in (say) 1760. There’s been unprecedented growth since then. Not quite “perpetual” but a bloody good run.

  3. Einstein suggested human stupidity and the universe were infinite but he wasn’t so sure about the universe. I wonder wha his opinion on human ingenuity was?

  4. The problem is that Murphy doesn’t understand that “growth” is being used as jargon for “an increase in the deemed value of consumption of goods and services” instead of “increase in physical size” (as in trees).
    This is due to his losing interest and failing to pay attention in the Economics letters at his second-class university.

  5. Given the likely end of the universe in maximum entropy (heat death of the universe) in the very long run this is true. But, probably not what they were thinking.

  6. The “finite world” bit really means finite Stuff. Though if you really want to go mad and extract it all, there’s a stupendous heck of a lot of iron, aluminium, water, clay, silicon, phosphate, sunshine, pretty much whatever takes your fancy, out there if you want to use it. But generally we want this Stuff because we turn it into something else that adds value. And just like computers have got smaller over the years, that doesn’t always mean we want more Stuff to produce more value, just better use thereof.

    Anyone got any idea how many total tonnes of Stuff (foodstuffs, steel, concrete, plastic, rubber, jet fuel, scandium, whatevs) is consumed per capita in the Western world at the moment, and what the trend actually is? Might be quite high if you think of all the construction material that goes into your average new hospital (or your car insurance firm’s new office block etc) but I would be surprised if it’s been trending significantly upwards. May even be past the point of Peak Stuff, in terms of annual consumption if not the stock of assets?

  7. Yes, people do calculate “total use” in terms of “50 tonnes a year per head” or such. And they’re idiots. Using 50 tonnes of rock doesn’t actually matter.

    Tonnes of Sc, Fe, Al etc, look up USGS mineral commodity surveys and divide by global population. For Sc, 10 tonnes divided by 7 billion people.

    And you’re right, peak stuff has, for rich country people, probably already been and gone.

  8. But then Spud never has bothered to find out what economics is trying to tell him, has he?

    Well, no. In SpudWorld, it is not economics that has anything to tell the Spud; it is Spud who has wisdom he might deign to share with economics. Please try to keep up.

  9. dearieme, I would contend that growth has been going on for at least 3,500 years. While that is not forever, it is long enough to suggest there is no practical limit to growth. So Mr Murphy is just wrong.

    BWTM. The Left likes to use such “truisms” to justify telling people to give up. There is no reason to hope for your children “because growth will end sometime.” The Left’s objective is to get “sometime” to be now.

  10. If only there were a finite number of sexes to concern us. Or a finite number of big governmental systems.
    But on we go, more sexual gradations every decade, more types of toilet to be provided to cater for them. And more people saying their big government system needs trying because although all previous versions failed, there is only one form of capitalism which we all agree has failed.
    The world is infinite when it suits arguments they agree with.

  11. It’s important to look at both the aggregate and distributional effects of a policy which increases GDP. Here, a quote from the New York Times:

    Still, though trade may be good for the country over all — after netting out winners and losers — the case for globalization based on the fact that it helps expand the economic pie by 3 percent becomes much weaker when it also changes the distribution of the slices by 50 percent, Mr. Autor argued. And that is especially true when the American political system has shown no interest in compensating those on the losing side.

  12. So the question is, do we want to be rich, but unequal. Or do we want to be equally poor in our new Socialist Paradise?
    Oh yes, and I would rather poke my eyes out with a spoon than trust anything a journalist says.

  13. Talk of equality is bogus.

    “All men are born with different capabilities; if they are free, they are not equal; if they are equal, they are not free.” – Solzhenitsyn

  14. There is a definite hard limit to the amount of energy we can use. I’m not talking about “climate change”, just basic thermodynamics: high-entropy energy can only radiate into space at a certain rate, so we can’t keep increasing our energy use (which is a conversion of energy from low to high entropy) forever. For the last couple of centuries, energy use in the USA has increased at nearly bang on 3% per year (I don’t know but would guess it’s similar in most Western countries). At that rate, we’ve got about 400 years until the surface of the Earth reaches boiling point. Note that this is true regardless of how we generate the energy: it could be nuclear, or magic windfarms, or anything. So, obviously, we won’t do that.

    If GDP continues to grow exponentially, which it can as it is a measure of *value* not *stuff*, then it follows that energy production as a proportion of GDP must decrease, i.e. energy must get relatively cheaper and cheaper.

    Eventually, energy production will become so cheap that I can just buy all of it and hold the whole world to ransom. Assuming I’m still alive. Maybe I should write this plan down for my descendents.

  15. “At that rate, we’ve got about 400 years until the surface of the Earth reaches boiling point.”

    Thanks for the laugh.

  16. Gamecock, the Stefan-Boltzmann law was discovered well over a century ago. I don’t know if it’s in GCSE or A-level physics these days but I’m pretty sure it used to be in the O-level syllabus. Please tell me you’re not one of those postmodernist loons who thinks physics is subjective?

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