Economics--unending growth?

[maize]

It seems to me that policy makers are always talking about growing the economy; how fast the economy is growing, how to promote economic growth.

 

I can see that we have a historic trend of economic growth for the past few centuries--it goes along with industrialization, mechanization, globalization, and a burgeoning population.

 

Seems to me that those things are all going to slow down and in some cases reach an end point (i.e. most models predict a peak human population at some point this century, followed by a likely decline due to low birth rates and presumably eventual stabilization of some sort).

 

I don't personally see how economies worldwide could all keep growing indefinitely in real terms. Nor do I see why that should be a goal other than for the sake of folks at the top amassing ever greater wealth (why?).

 

Seems to me a healthy, sustainable economy would not necessarily need growth.

 

Do economists talk about this?

[Bootsie]

It seems that much of the economic growth overy history has come from either:

 

1)  population growth (and improvement in health)

2)  technology improvements--these seem to be sporadic and have large impacts at particular points in time and, for the most part, unpredictable.

 

Some of the economic growth in the last century has been fueled by policies that encourage things that enter the measures of economic growth.  GDP measures production of items that enter the marketplace.  So, if I grow my own vegetables (as my grandparents did) that production is not measured.  But, as soon as I purchase those tomatoes from a business, GDP has grown.  If I play catch with my son in the backyard, that is not part of GDP.  If I hire a catching coach to work with my son, GDP has expanded.  

 

The problem with a low growth rate is that it makes it difficult for one generation to save for retirement.  The rate of return on investments in the long run cannot exceed the rate of growth of the economy.  Without a growing economy, I can put away a resource to use it when I retire, but I will not see it growing.  

[ILiveInFlipFlops]

It seems to me that policy makers are always talking about growing the economy; how fast the economy is growing, how to promote economic growth.

 

I can see that we have a historic trend of economic growth for the past few centuries--it goes along with industrialization, mechanization, globalization, and a burgeoning population.

 

Seems to me that those things are all going to slow down and in some cases reach an end point (i.e. most models predict a peak human population at some point this century, followed by a likely decline due to low birth rates and presumably eventual stabilization of some sort).

 

I don't personally see how economies worldwide could all keep growing indefinitely in real terms. Nor do I see why that should be a goal other than for the sake of folks at the top amassing ever greater wealth (why?).

 

Seems to me a healthy, sustainable economy would not necessarily need growth.

 

Do economists talk about this?

 

I wonder this all the time. It's one of the things that makes me want to go back to school for an economics degree!

[Bootsie]

http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.29.3.31

 

This article provides an overview of some of the issues related to technology and economic growth.

[EMS83]

It's all a mind game.

[Bootsie]

The government can spend money on tanks and bulldozers, use them to destroy a great deal of infrastructure, and then rebuild them to have economic growth (given the way it is generally measured.)

[Bluegoat]

It's true that this is a relatively recent phenomena - you don't get anywhere near the level of growth we thing is necessary until around the industrial revolution.  Even when it ramped up and people hot they'd entered  new era, I think it was somewhere around 1/% 0 much lower than we think we need now, anyway  But even that was much higher than it had been before.

 

I like Small Is Beautiful o this - it's really the classic IMO and although some things are quite different now - his perspective on coal is interesting - the ideas he talks about are, to me, crucial ones to think about a sustainable economy.

[KaleSprouts]

It seems to me that policy makers are always talking about growing the economy; how fast the economy is growing, how to promote economic growth.

 

I can see that we have a historic trend of economic growth for the past few centuries--it goes along with industrialization, mechanization, globalization, and a burgeoning population.

 

Seems to me that those things are all going to slow down and in some cases reach an end point (i.e. most models predict a peak human population at some point this century, followed by a likely decline due to low birth rates and presumably eventual stabilization of some sort).

 

I don't personally see how economies worldwide could all keep growing indefinitely in real terms. Nor do I see why that should be a goal other than for the sake of folks at the top amassing ever greater wealth (why?).

 

Seems to me a healthy, sustainable economy would not necessarily need growth.

 

Do economists talk about this?

 

 

Yes!  Economists do talk about this.   I don't want to be super boring or get too nerdy but I've been really interested in economics for the past decade I feel like the questions you asked are important ones that there is very little public discussion about.  I know you didn't ask about economic history,  but there are some things related to the topics you bring up that I feel are important to include in my post.  

 

In the U.S. we have a mixed economy - it's not a fully centrally planned economy (think communism or socialism) and it's not a free market.   The Federal Reserve (Fed) (our central bank) plays a huge role in this by controlling the money supply and interest rates and since the Fed Chairman is a presidential appointment there is always power, politics, and crony-ism involved.  Fed policies are geared toward "growing" the economy.  The Federal Reserve was created by the most rich and powerful bankers in the world (who's interests do you think they're looking out for!).  One source for the history of the creation of the Fed is the book The Creature from Jekyll Island" (Jekyll Island is where the bankers met to flesh out the idea).  

 

The intellectual roots of our mixed economy are from John Maynard Keynes, who bucked the progress in ideas of the classical economists which sought to explain rather than manage the economy.  His economics focus on using data (called aggregates, and are based on models of the economy) to manage the economy - with a focus on growth.  Inflation (the expansion in the supply of our fiat currency), low interest rates, deficit spending, and a push toward consumerism are important elements in this branch of economics and most college economics courses teach from this school of thought.    Friedrich Hayek would be considered the biggest intellectual opposition to Keynes and be considered a free market economist (and free market economists are generally in the "Chicago School" or "Austrian School").  Hayek argued that human interactions were too complex and could not be modeled accurately by economists and published his criticism of central planning in The Fatal Conceit.  Hayek won a Nobel prize for his research and analysis of economic processes.

 

 This seems decent about some of that history: https://www.econedlink.org/lesson/593/Keynes-vs-Hayek-Rise-Chicago-School-Economics

 

Or if you want something more entertaining there's this Keynes vs. Hayek rap battle.  I'm not a big fan of rap but I'm really impressed that someone put this together this intellectual debate in such an entertaining way (I don't recall any language issues but there are women in skimpy dresses and over-consumption of alcohol): 

 

So all of this to come around and say that there are economists who think about this and who would agree with your statement of, "I don't personally see how economies worldwide could all keep growing indefinitely in real terms."   One example is the study of Austrian Business Cycle Theory, which examines the boom and bust cycle (economic booms and then recessions/depressions) and seeks to explain and correlate that process with economic intervention from the government and central banks that are focused on "growth".   They also tend to publish a lot of books about how Keynes was wrong -  there are volumes and volumes out there musing about the points you bring up :-)

 

 

[StephanieZ]

The government can spend money on tanks and bulldozers, use them to destroy a great deal of infrastructure, and then rebuild them to have economic growth (given the way it is generally measured.)

 

yes, this is why hurricanes and other disasters can spur "growth". 

 

It's really crazy, actually, when you think about it . . . Burn down your house, rebuild the same house, but you've now contributed to the GDP . . . but you're back where you started! 

[Bootsie]

 

In the U.S. we have a mixed economy - it's not a fully centrally planned economy (think communism or socialism) and it's not a free market.   The Federal Reserve (Fed) (our central bank) plays a huge role in this by controlling the money supply and interest rates and since the Fed Chairman is a presidential appointment there is always power, politics, and crony-ism involved.  Fed policies are geared toward "growing" the economy.  The Federal Reserve was created by the most rich and powerful bankers in the world (who's interests do you think they're looking out for!).  One source for the history of the creation of the Fed is the book The Creature from Jekyll Island" (Jekyll Island is where the bankers met to flesh out the idea).  

 

 

Although Federal Reserve Board of Governors are appointed by the president, there are 7 positions, each 14 years long, with one expiring every two years.  Also, a governor is not eligible for reappointment (unless they served a partial term to fill a previous vacancy), so as to reduce pressure to bend toward political pressure.  A two-term president, in theory, would appoint 4 governors, but that would be only as that president's terms is coming to an end.  So, the majority of the governors during any president's term would be appointees of previous presidents.  

 

However, there is currently an unusual situation at the FED.  Three of the seven seats have been vacant, giving Trump the ability to appoint three governors quickly.  In addition, Yellen has announced that she will resign from the board when he chairmanship is completed.  This means that Trump will be able to appoint the majority of the board.  While there was much talk about potential Supreme Court nominees, there was very little about the Fed appointments discussed during the election.