Infinite economic growth and the best things in life are free

Please pass the salt.  Here’s an economist, Tim Worstall who writes in The Telegram, arguing that infinite economic growth is possible even though we live on a finite planet with finite resources.

His argument, as I understand it,  is that applying new technology to recycled resources will increase the value of those resources so that GDP can  go up forever.  It’s an argument which a lot of people will want to accept because empires or even livelihoods depend upon continued economic growth.

If we are going to talk about economic growth there are two questions that should be considered.  Is growth necessary or desirable?  Do we need to make changes in how our economy is organized to adjust to the impact of using up the most available of resources?  Some people build empires and amass riches thanks to economic growth.  Others, myself included, are not ambitious in that way  and question the need for economic growth.  I would prefer to do things other than work on the building of somebody else’s empire.  Our agricultural surplus is so great that we have to “work” very little to do our share to support ourselves.  The question is who decides how to use the surplus.  I would like to see our economy organized so that as much as possible each individual could decide how his share is to be used.

The argument is that applying new technology to recycled resources will allow infinite economic growth. The difficulty is that not all resources, especially energy, can be recycled and there is no certainty that there will always be new technology.  There are still tremendous oil reserves in the crust of this planet. However it is not clear how easy it will be to extract those reserves.  How many units of energy will it take to extract 100 units of energy?  If technology can bring the answer down to the point where a barrel of oil sells for $15 to 20,  then we might expect more  old-fashioned economic growth.

Worstall  defines economic growth as an increase in GDP which is the value at market prices of all final goods and services.   In this view the value of an item is determined by its market price which is determined by supply and demand.  I would like to make a distinction between price and value because somethings we value have a low price as their supply is plentiful.  (There’s and old song The Best Things in Life are Free.)  A walk in the forest usually involves only the cost of getting to the forest which depends upon where one lives.    There are lots of things we value which are not captured by GDP.  Some of us might like to see “growth” in these things.  It would be nice if we as individuals could make that decision rather than having an economist tell us what to do.

Economic growth is a complex issue.  There may be problems with the resource base and the most widely used definition excludes a lot of activities which a lot of people value highly.

The current economic crisis is affecting people around the world.  Many people believe that only economic growth will solve our problems.  This blogger figures that to minimize the human suffering resulting from economic problems it may be necessary to reorganize our economy.  Some suggestions are in the essay “LETS go to market: Dealing with the economic crisis” on this weblog.


2 Responses

  1. I agree that innovation allows permanent economic growth, even with finite resources. Currently, the U.S. strongly needs some innovation in some fundamental aspects of our society, because we are drifting toward a situation where most people will be poor. Here’s my prescription:

  2. If I understand correctly, economic growth is not the be all end all for prosperity, but some of these comments sound like dislike like growth doesn’t mean fairness. An economy is beautiful in that people have varied talents and people should be rewarded for those talents or investments that no one else would risk doing. If we didn’t have growth there would never be the opportunity for charity or any sort of upward mobility. The strangest comment was one doubting that there would be new technology in the future. I have faith in humankind and ingenuity that things will always develop. The pace may slow and maybe some advances will not be as desirable, but we could argue the industrial revolution had many undesirable consequences, however, we would never be where we are today without it. Not everything is about money. Economic growth while measure in dollars is so much more than that. It represents opportunity, but you have to be creative to survive. Who said it should be easy? We are best served to learn how to find what our talents are and work hard to create our own value. If you find something valuable no doubt you can find a bunch if other people who find the same things valuable. Sure the opportunity and growth is just a byproduct.

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