Friday, March 03, 2006

Economic growth - forever

Many environmentally-minded people have the impression that fixed natural resources, in principle, makes perpetual economic growth impossible. This seems to make sense from an input-output perspective: growing output requires growing input (true); however some of the required inputs are fixed (true); hence output must stop growing eventually.

However the mistake is this: growing output requires at least one growing input. If the growing input can substitute for the non-growing inputs, then it is mathematically possible for the limiting point (zero natural resources) to be reached at time infinity - with economic growth happening all along the way.

What can be this perpetually growing input? In human history, economic growth has typically been driven by technology. Technology ultimately is based on human intelligence, or information processing.

It seems that the ability to discover new stuff is limitless. That is, it seems that humans will also be able to discover new things that the market values. This is the crucial point: economic growth is not just a matter of piling up new stuff by weight. Then certainly economic growth is limited. Economic growth is a matter of piling up new stuff by market value, based on subjective assessment of individuals, collectively summed up in the market price. This process holds the key to perpetual economic growth.

Scattalaxis has another way of putting it. In addition to the economic sphere and the biosphere is the "noosphere" (was this originated by de Chardin?) The products of the noosphere appear to be limitless, as valued by the noosphere itself.

Now all of these are possibilities are based on theory. On the other hand perhaps humans will run out of innovations, or perhaps inventions are not as substitutable with natural resources as we think. For example, perhaps it is not possible to find a cheap substitute for oil-powered transportation.

In the long run, my money is on the human mind.

1 comment:

Anonymous said...

You have an original yet weird notion that somehow, the input of technological change will stimulate endless economic growth. Economic growth is a measure of, ultimately, goods, services and consumption. At some point, new technology will simply replace a given service, and cannot, in and of itself, replace physical goods or resources. In other words, you may have created a clever formula, but it bears to relationship to physical reality. In the real world, the exchange between living beings (termed as above) simply is given one descriptive or another...there is no actual 'growth' once resources have been exhausted, (other than inflation or novel nomencalture approach). Physical systems like our planet are, whether we want to admit it or not, finite. What exactly are you 'growing'? I think you would be surprised and not very pleased at some of the results of technology if it endlessly churns through its human is not, in and of itself, always positive or good. Frankly, our hubristic stance on this planet has me scared...what exactly is our relationship to it and everything else that inhabits it? How do they figure in your 'economic growth'? I'm not just spouting some fringe ecological junk...I'm talking about the fact that we somehow think that we are the solo species on earth. Well, we might end up that way, only to discover what a sterile planet we have indeed. But the sacred cow of growth will remain sacrosanct. What exactly are you thinking of? Did it ever occur to you just what sort of world you are recommending? And that you are, whether you admit it or not, fudging on the physics of the deal?
You remind me of Julian Simon...whose absolutely thoughtless notions were used as advice by several administrations. He thought resources were endless. You think technology as an input datum is endless. Uh, Not.