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The Progressive Economics Forum

Is infinite economic growth possible?

Most environmentalists would probably say no. But I’m going to make the opposite case here.

The thing we need to remember about economic growth is that over long periods of time the products we consume and the processes by which we produce them change dramatically. As my old prof Dick Lipsey pointed out repeatedly, we have a higher standard of living today than in our great-grandparents time not because we have double the number of smokestack factories but because of new and different modes of production leading to new and different products. The fact that about 70% of our economy is now services, most of which are less environmentally destructive (air travel notwithstanding) reinforces this point.

Environmentalists would be correct about growth if doubling our GDP led to doubling the amount of materials, energy and pollution associated with production and consumption. But this need not be the case, at least in theory. That is, infinite economic growth is possible, as long as:

  • i) the amount of raw materials extracted and energy produced is at or below some base sustainable level;
  • ii) any additional negative externalities (ie. pollution) are kept below the “sink” capacity of nature; and
  • iii) we have a fiat money system.

Under those conditions, there is no reason why GDP could not double, triple or increase ten-fold. Which is good news because the nature of transformation needed to address climate change is massive, and will be accomplished much more easily in a growth framework than in a zero-sum one.

The press for carbon taxes and cap-and-trade systems certainly moves us in the right direction in terms of addressing points i and ii. The vector for change here is in technology: how we retool our economy over time with technologies that are lower, eventually, zero emission and that are massively more energy efficient (this is Mark Jaccard’s key point in his climate modelling). Recycling of materials is also necessary to minimize the need for new resource extraction, given the amount of materials already circulating around. One intriguing area for future thinking is iii, if we get to a stage where the right to emit carbon dioxide is so valuable that it becomes a de facto anchor for money (the “carbon standard” instead of the gold standard), but this is all pretty speculative.

Having said all of that, the environmentalists may be right in the end because capitalism-as-we-know-it loves to gobble up more materials and energy and externalize its costs. Ecological economics is helpful in sorting out how materials, energy and externalities are associated with production. In neoclassical economics we cannot even have this discussion because labour and capital are the only inputs to production, technology is a black box, there are no externalities, and money is “neutral”. So it is important to distinguish economic actors in models of “the market” with the behaviour of actual consumers and companies in the system we call capitalism. The bigger question is whether capitalism as an economic system is ultimately compatible, at least in its current dominant form, with a carbon neutral economy.

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Comments

Comment from Brian Gilstrap
Time: April 3, 2008, 11:23 am

Items (i) and (ii) are essentially a statement that we must pursue growth sustainably (in terms of resource usage and in terms of pollution/degradation of the environment).

In theory, it is possible to expand our resources to include off-planet resources (the moon, asteroids, etc.). However, the cost of escaping the gravity well of the planet and the difficulty of creating sustainable off-planet habitats make this extremely unlikely. A reduced form of this approach is to collect large amounts of solar power from near space and transport it to the planet. This approach might work, but is also quite costly and may result in planetary warming (if the planet is unable to radiate away the energy brought down from space as quickly as we bring it down). Even with this approach, there is a practical limit to how much solar energy we can capture and send down to the planet.

Even with ‘massively more energy efficient’ technologies, there is still a limit. Admittedly, that limit is higher than without those technologies. But the limit is still there, just pushed higher.

So, (i) and (ii) are really only possible if we limit the population to a sustainable level. Technology may allow us to push up the maximum sustainable level, but it can’t make it infinite.

The consequence of all this is that we have to limit population growth. Otherwise, we are guaranteed to exceed the carrying capacity of the planet.

And if we limit population growth because we can’t sustain a larger population, that means we can’t have infinite economic growth.

Comment from Andrew Jackson
Time: April 3, 2008, 1:09 pm

I have made very similar arguments whcih are true to a considerable poin,t but “infinite” growth? Even if we became 90% more carbon efficient, energy efficient, materials efficient etc etc., global growth of 2-3% compounds to produce large increases in absolute consumption over long periods of time, and infinite increases over infinite periods of time. Even profound tech change is unlikely to very radically dematerialize our economy – though one can always argue we live in an infintely large universe, I suppose.

Comment from Paul T.
Time: April 3, 2008, 2:27 pm

Hey Marc,

I hate to take opposing sides on this one, but I will. I do not do it willingly as I to want to believe this. However:

These are very theoretical concepts you are taking about. In fact so theoretical I think in a sense they are quite unrealistic and kind of gets into the whole neo-con discourse that we are infinitely smart humans and can conquer any challenge. I am not in that camp. I would say that the problems you mention are infinitely complex and therefore will never be more than a fleeting theory. Will they ever make their landing in the reality of the practical.

I just do not see how we could ever establish production processes that will produce the goods that you mention and satisfy the current levels of needs with any notion of equity. Kind of a Maltusian argument I guess. Even with the long range tech advanced production systems, I do not see how we could raise the entire planets standard of living to meet even the baseline needs of a person within a developed countries standards given the current or even the most advanced on the far off shelf tech.

I am no Luddite either, in fact you can accuse me of pushing the positivist argument that we can figure it all out and we just need the time and technology. I wrote something last year for Wired.com that was more than guilty of leading on the masses in the pursuit and promise of technology. I guess my double talk is based upon the premise that one has got to remain an optimist. Otherwise what is the point.

However, maybe a muted optimist, that is unless we can somehow magically find transportation and a destination for one of those billion billion planets within one of those those billion billion solar systems, within one of those billion billion galaxies, within possibly one of those billion billion dimensions. (still have no evidence on those other dimensions but just in case I’ll throw them in, and oh yes, that is still a finite number, but it could all be expanding as Andrew states, lol)

However, I could be wrong and I hope I am. We need to get through the next 200 years in one piece, given the environmental backdrop that seems to have given rise to the specter of Maltus again.

Comment from Darwin O’Connor
Time: April 3, 2008, 4:15 pm

I think it can be achieved. Everything comes down to really come down to matter and energy.

Long term clean energy can be provided by nuclear fusion.

With nanotechnology all waste can be recycled at a molecular level and resources can be extracted much more efficiently.

Food can be grown with hydroponics, eventually only growing the parts of the plant or animal we actually need.

Population growth may not be a problem because when a population reaches the western standard of living they tend to reproduce below subsistence levels, so population drop may become a concern.

Economic growth will increasingly be focused on entertainment, IT and science, all industries with minimal environmental impact and all creative activities people would do even if they wheren’t paid.

Comment from Paul T.
Time: April 3, 2008, 5:13 pm

you guys sure are optimists, and here I thought economics was the dismal science.

Have a read of Ulrich Beck’s “Risk Society” and it is the direction we are most likely heading.

Wow I sure would like to live in that world of tech that is mentioned . I just do not see the advances. In fact I would argue the tech is what is at the heart of our destructive living space, and let me say this again, I am not techno-phobic, just a realist. I wish life was like a a science fiction novel but sadly its not.

I think you hit it right on the head on what is wrong when you project that Entertainment will be the leading industry of the future. Lets escape and pretend that the water you drink is not contaminated with pollutants, but that wide screen TV sure is awesome.

It is all opinion and good fun to debate so don’t take it personally.

Comment from Marc Lee
Time: April 5, 2008, 1:43 am

Thanks all for the interesting comments.

I’m just making the theoretical case here for why the “growth is bad” meme is not necessarily correct. And note that I end on a skeptical note about our ability to achieve the core sustainability needed (points i and ii).

With climate change, I can see a plausible path forward that takes us to more-or-less carbon neutrality. And I’m trying to argue for that with all of my powers of persuasion. BUT I have great skepticism about our leaders and vested interests getting us there in time.

There’s an alternative theoretical case, made by Gideon Rosenbluth among others, that shows what a steady state zero growth economy looks like. But I think this is flawed based on the need for growth in a capitalist system. We can, of course, find ways of marginalizing capitalism, and I am willing to go there. But given how deeply entrenched capitalism is in the legal, political and economic realms, I’m not holding my breath for some alternative non-capitalist utopia to emerge any time soon.

Plus while capitalism has major shortcomings, its one true strength is in dynamism and innovation, which is precisely what we need given the challenges ahead. Government, it should also be noted, can play a really important complementary role in boosting basic research, and promoting diffusion of successful technologies, and ensuring that intellectual property rules do not stifle innovation.

Is this overly optimistic? Perhaps. But look at what they came up in visions of the future forty years ago, ie the original Star Trek. And compare that to today’s computers and communication technologies (they win on transportation, but they were also projecting several hundred years into the future).

2050 is forty-two years away. Can we make a new industrial revolution that decarbonizes the economy? I think so, if we are committed societally and politically. Will we? Hard to say.

Comment from Todd Archer
Time: April 5, 2008, 7:42 am

Hi, Mark.

Good post. I agree with you: infinite economic growth _is_ entirely possible (just much more difficult, ugly, and downright dangerous under capitalism).

“As my old prof Dick Lipsey pointed out repeatedly, we have a higher standard of living today than in our great-grandparents time not because we have double the number of smokestack factories but because of new and different modes of production leading to new and different products.”

Correct me if I’m wrong, but Prof. Lipsey’s remark about the smokestacks isn’t entirely true. While there has been these new and different modes of production, the smokestacks and other poisonous effulgences have simply been moved (if not multiplied) to areas where democracy doesn’t create so much “uncertainty” for those poor investors and owners. And I have no doubt in capitalism’s dynamism to find ever more interesting ways to poison people who can’t pay enough for protection before laws are passed which result in the poisoning being moved to less “volatile” areas.

“The vector for change here is in technology”

This could be done. The trick is that, under current conditions, those with the wherewithal to do it won’t unless they can get more of a profit out of it than by doing it some other, dirtier, way (especialy when such technology would be somewhat more expensive than the older, cheaper, less efficient, and therefore dirtier tech).

“The bigger question is whether capitalism as an economic system is ultimately compatible, at least in its current dominant form, with a carbon neutral economy.”

Depending on how well the money’s coming in will definitely be a factor in this. So long as that’s expansive, the bourgeois can afford to be, too. But when those inevitable crises hit . . . .

As an addendum to the Malthusianesque points, I’d like to point out that the good reverend didn’t understand the concept of productive technology nor the realities of _distribution_ under capitalism.

“I’m not holding my breath for some alternative non-capitalist utopia to emerge any time soon.”

Nor should you, Mark, but remember that capitalism was itself once a non-medieval utopia, too.

Comment from Paul T.
Time: April 6, 2008, 8:32 am

All speculation aside, the seriousness of the point that confronts us with this argument , is that capitalism as it has operated since its inception, has internalized this perspective. That is, there are no limits to growth.

As you do point out Marc, one of its survival mechanisms is its relative ability contra other systems, to display high degree of innovation. However given the mass production processes it has spawned, the one area that it has traditionally taken as a free input, is the environment.

My question is, if it now has to pale a cost on this input, will a large portion of the current production processes, be within any reach of an innovative path to meet the true needs of environmental change. i.e. can these processes be innovated to meet this environmental challenge or do we need to rethink the whole functionality given these new constraints and costs structures.

I will put out a few examples, the cod fishing industry was destroyed by what some call a mass production system designed for unlimited growth meets a renewable resources, but the production process designers for fishing trawlers and equipment fail to acknowledge that the time line for resource renewal far exceeds the extraction capacities unleashed.

Another example is farming. Many farming techniques currently implemented are stretching the sustain capacities for the environment, and in many cases are destroying th e reproductive capacities of the soil.

A last example that I am writing a couple of papers on is the forestry sector. The design paradigm again of the production process has spawned great advanced machines, that can strip a forest within a time frame that was unheard of years ago. Deforestation coming from this clear cutting has brought on the apocalypse for many a forests ranging from the rain forest s to the boreal forests. The foot print left by these techniques no matter what the replanting and slivaculture techniques has left footprints that have flattened the ability of these forests to be restored to a healthiy robust natural forest. Monoculture tree farms are no replacement for the complexity of natural ecosystems.

Of course underlying each and every step of the design paradigm of this application of technology has been profit maximization. So will these unsustainable design paradigms, be changed and survive to produce a system that is environmentally sustainable and also meets the needs of capilatism in its current dynamic. Capitalism has evolved over time. However, if the end result of this new constraint of the environment is placed upon it, can it still innovate and survive.

I would go and have a look within Schumpeter for some direction on this. And I believe he says no. I read a chapter the other night on the limited opportunities of investment, that seems to breath some life on this argument.

Glad you posted this topic as it is at the crux of some important issues that are unfolding.

Paul

Comment from Paul T.
Time: April 6, 2008, 11:29 am

I am not preaching anti tech, but i am questioning the instrumental design of their ends. It is not to improve technology o feed the world or eliminate disease, but quite simply profit maximization. The causality is at the heart of the design process for technology. Tech does not just happen, it is molded, kneaded and pulled from the science that is available and it is the forces of capital that see an opportunity for profit on large grandiose levels that the next generation of innovation is based upon. Do we really think that the needs of the environment are going to make it into this space for decision making.

So I did not mean in the comment above that I think we should resist technology development. It is just we need qualitative changes within it to turn around the quantitative impacts it has.

pt

Comment from Michael Barkusky
Time: April 9, 2008, 10:59 pm

Marc, you did originally use the word “infinite”, did you not ? If a dollar of real GDP has any physical dimensions at all, and if the planet is not “infinite”, how pray tell, are we to possibly to have “infinite growth” in real GDP ? This is a bit simplistic, of course. Economic consumption does not obliterate atoms, it merely rearranges them. The first law of thermodynamics (conservation of matter / energy) is not the problem. It is the second law – the entropy principle (the one that is missing from most economic textbooks from principles texts to graduate level) that we need to face up to. The entropy principle tells us that in a closed system entropy increases naturally, certainly as useful work (in the physicist’s sense) is accomplished. This means “available” energy (low entropy matter/energy) is the limiting factor in an essentially closed system like the planet earth. We do of course benefit from solar radiation which should last quite a while yet, but solar radiation is flow-limited, even if it stock-abundant. Terrestial stocks of available energy however, are much more limited, relative to current usage. Another limiting factor is the capacity to absorb high-entropy wastes. And a third limiting factor is the declining space we allow for viable biodiversity. Capital theory tells us that if we consider cash to be an effective substitute for biomass, in both directions, then anthropocentric decision-making, whether by markets or central planners will tend to eliminate anthropocentrically-useless biomass, and re-invest the proceeds in faster-growing “useful” species. As we eliminate slow-growing species, we raise the hurdle discount rates our capital markets reflect back to us as the economic norm, in our now faster-growing world. This then provides the incentive to eliminate, at the margin, a succession of ever faster-growing species. The reductio ad absurdum climax of an anthropocentrically-directed growth economy is an economy with only one surviving plant and one surviving animal species ! Such a system will have virtually no ecological resilience.

Ecological economists in the Daley-ite tradition (like me) are happy to welcome de-materialized economic progress. We call it “development”. We use the word “growth” for economic progress that has a a significant entropy footprint. We don’t think that the benefits of growth today, in industrialized countries, are worth the cost, but we also think that the benefits of development are almost always worth the cost. Infinite economic growth, in this sense is impossible, just as in the story of the numbers of grains of rice starting with 1 grain, being doubled on each successive square of the 64-square chessboard. But long before one hits these fatal limits, such growth is uneconomic, and many of us believe we are already at that point in most rich countries, and probably, in the most heavily- populated poor countries too.

It seems obvious then, surely, that sensible policy should provide incentives for development, and disincentives for growth.

Michael Barkusky

Comment from Todd Archer
Time: April 10, 2008, 10:51 pm

“If a dollar of real GDP has any physical dimensions at all, and if the planet is not “infinite”, how pray tell, are we to possibly to have “infinite growth” in real GDP”

How much growth of GDP must be attributed to the actual creation of physical “stuff”? Doesn’t GDP include intangibles like stock-trades, old-fashioned swindling, “knowledge-products”, etc? Do products and effects like these take up space (although it must be based in some kind of tangible product at some point)? And what about the old “creative destruction” that allows bourgeois to get rich destroying cities then building them back up again? And none of this takes into account ventures off the planet . . . .

Comment from Michael Barkusky
Time: April 11, 2008, 12:01 am

That’s exactly why the “growth” versus “development” distinction is so useful. We can then better distinguish “goods and services” that meet our demands at a low opportunity cost in entropic terms, from those that do so at a very high entropic opportunity cost.

Comment from Todd Archer
Time: April 13, 2008, 11:28 am

I beg your pardon, Michael: I only caught your distinctions between growth and development just now.

But this distinction doesn’t really affect much Marc’s thoughts on economic growth, does it? It seemed to me he was talking about economic growth “as such” rather than just growth as you define it. His use of the term could encompass both your use of it and your use of development, too, right?

New applications of science and technology could, theoretically, allow more effecient use of resources and thereby reduce the entropy footprint (pace to bourgeois demands); perhaps space colonization (or even just use/colonization of heretofore unusable land on Earth after suitable “development”) could “spread out” the footprint more quickly than it could be impressed.

Capitalism, it’s representatives, and their mouthpieces have all shown remarkable resilience before . . . .

Comment from Michael Barkusky
Time: April 13, 2008, 9:37 pm

Yes, if by feasible perpetual growth, Marc meant what Daly calls “development”, I think we probably have it continue as long as the sun lasts, and our brains still function. If by growth we mean what we have now, where more real GDP seems necessarily to have an ongoing non-trivial physical-resource intensity (and to produce significant wastes), then I would guess we have no more than 100 (perhaps 150 at a stretch) years of growth left.

If we make some kind of technological breakthrough that makes space colonization (or even storage of our wastes in space) feasible, perhaps we have longer, but that seems to me to be a pretty long shot. Getting high entropy stuff (wastes) into space uses up an awful lot of increasingly scarce low-entropy matter/energy. Wouldn’t it be a lot easier to figure out how to limit our reproduction rates, limit our consumption appetites and distribute the goodies a little more equitably amongst those of us left ?

Comment from Todd Archer
Time: April 16, 2008, 9:58 am

“Wouldn’t it be a lot easier to figure out how to limit our reproduction rates, limit our consumption appetites and distribute the goodies a little more equitably amongst those of us left ?”

It seems that we’re arguing about where that energy should be going.

I have no disagreement with the above; it’s just that the second and third points are driven by capitalism’s logic of pushing the product at all costs to realize surplus value. You’ll need to burn lots of energy, too, to deal with that little fact; who’s to say whether or not the energy, money, and manpower spent on tech won’t more or less equal that amount, too.

(As for limiting reproduction rates, that does tend to happen on its own when people are less concerned with the “brute” necessities of living; at the very least I’d expect they’d be more open to the idea when they have more of a “social cushion” to fall back on than children, more education to open their minds to different ways of seeing the world, and better health for their children so as to ensure they don’t have to keep trying to get enough of them.)

Comment from Duarte
Time: June 28, 2010, 5:55 am

Growth always means a quantitative change. And it is clear that growth may depend on qualitative changes too.
But the economy is governed by different balances. One is between the quantities produced and the ability to consume such quantities. You could say that the quantities produced are higher than the capacity we have to consume an imbalance known as overproduction. The same can happen in reverse, the production is insufficient for the needs and capabilities of consumer populations. In this case we say that there is an underproduction. Both phenomena cause tensions on prices which in turn must be balanced with the proceeds distributed according to the wealth generated.
Other balances are also important, situated at the level of sustainability of resources used, the levels of pollution and environmental degradation generated by successive increases in production, as well as the balance of population.
Probably will grow infinitely first bump into the barrier of buying power, with the levels of disposable income, with overuse of resources, decreased population growth, with levels of environmental control.
Why not defend otherwise a process of sustained development in the current production capacity?

Comment from John Clarkson
Time: August 10, 2010, 6:02 am

Economic growth is not infinitely possible and Sustainable growth is an oxymoron. Continuing population growth, at even 1% per year, would double it in just 69.3 years. Eventually, populations will overwhelm the annual savings that can be achieved nationally or globally through improved efficiencies. In addition, ecological damage would ensue. Economic growth is thus not possible. We are like bacteria in a bottle, growing at a rate of doubling every minute. If it takes 1 hour to fill the bottle at what time (assuming we start at 11.00am) will it be half full? And if 3 new bottles were discovered, when will they be full? Consider your answers carefully. It’s all over by 12.02pm. History teaches us exactly this point over and over again. Babylon, Easter Island, you name it. Just this time it will hit the Americans the hardest.

Comment from Jonas D
Time: May 4, 2011, 2:34 am

First off, I would like to thank you all for this eye-opening thread (although it was sometimes hard to understand everything for the foreigner that I am). I’ve been asking myself these questions for some time now and I’m glad some (briliant) people have been too, and went way more in depth than I ever did.

I still have one question:

Would infinite economic growth (or development) be possible if we could:
– achieve a 100% recycling rate of everything we produce
– obtain all the energy we need from renewable ressources
– keep the environment in a stable state that would allow a finite number of people to live in (in a comfortable way)
– maintain (somewhat) constant technological breakthroughs, even with a stagnating population ?

Comment from Dave
Time: July 13, 2011, 11:28 am

I complete agree with everything you say. I am not a tree-hugger. That said, unfortunately, I believe none of the three necessary conditions (i, ii, or iii) exist to allow for infinite growth. On a long enough timeline, that finite world thing always bites ya.

i. There is no “base” sustainable level in our finite universe, unless your timeline is also finite and expect our species to expire or exit the planet by a pre-determined time.

ii. Entropy dashes another dream. Unless we limit the timeline of our existence on this planet, we will eventually be stuck in the “sink.”

iii. Our Fiat system is an unsustainable problem all its own, and probably has a much short lifespan than economic expansion. As long as debt (i.e. “money”) is being created, “growth” can indeed continue. Unfortunately, Since the interest required to pay the debt isn’t created, over the time the debt service costs significantly degrade the benefits of added debt… and thus being the collapse of the debt ponzi.

Comment from andy765gtr
Time: July 14, 2011, 4:14 am

infinite growth is NOT possible on a finite planet as our culminating experiment on ‘planet easter island’ is demonstrating right now. the fantasist, cornucopianist essay above avoids the main issues and is an example of why we are in a pickle – denial. its just another attempt to run away from the problem by yet another flawed thinker. someone with economics training (a psuedoscience) no doubt.

as others have pointed out there is a distinction between growth and development. development good, growth bad, pretty obviously considering we live on a relatively tiny non expanding ball of rock surrounded by an infinity of vacuum. but there is one problem, we are already far beyond limits to growth, sans oil.

of course you can attempt to substitute the word ‘development’ but even if our population magically stopped growing exponentially and became incredibly sensible, cooperative and frugal – maybe because aliens came down from space and altered the wiring of our irrational, competing monkey brains, or something – because i cant see it happening otherwise- we are still buggered. this is because the LEVEL of consumption of one large monkey species in 2011 is, after 200 years of detritus based exponential growth largely uninfluenced by natural limiting factors such as predation or war, now astronomically beyond true carrying capacity; by perhaps over 20 times if you consider loss of skillsets and degradation of soils and forests, large fauna, fisheries, run away climate change and other carrying capacity factors by industrial agriculture, cities, roads pollution and hundreds of other environment degrading human factors.

when the artificial prop of half a billion years of detritus capital energy is taken away we will see the other side of the growth spike. and no, we cannot substitute ‘alternative’ energy. not on the scale required, and not for the uses required. they are all fossil fuel derivatives; you cant make a wind turbine with energy from a wind turbine – entropy steps in. we urgently require every drop for food and transport, the lead in time is decades and markets will be too slow to react (and have no energy to react with).

and there was never an energy crisis, or food crisis. only a human population crisis.

colossal dieoff (a natural reajustment to carrying capacity) is the inevitable (and entirely foreseeable) outcome for the grave mistake and hubris of economists not taking limits into account. in fact, going further, they made the mistake of even imagining they actually belonged to a legitimate aspect of knowledge and we made the mistake of letting them have control over politics. as scientists at least from the 1960s said there are limits to growth.

unfortunately there are no limits to greed, ignorance, denial and stupidity (words that sum up economics).

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