Very interesting article. In human history, we have always had periods where growth comes from expansion and then periods where growth comes from innovation.
Globalization was an expansion-driven growth phase and we have reached the end of what it can do for global growth - yes there are regions that are still catching up with the rest of the wrold but barring Africa, their population is relatively small so their catch-up will not contribute to significant global growth.
We have transitioned into an innovation driven growth-phase now. We'll have to wait for it to start to sputter before we know what kind of expansion-driven growth we will see next.
I like the fact that the author thinks of "what comes after" because a lot of the green efforts that we are seeing are looking to prevent climate change/global warming and not enough of preparing for the eventuality that our preventive actions may fail and what would the world look like if we failed and how do we survive & benefit from that.
I'm always a bit weary, when people rely on physics or rigid math to derive economic conclusions. In this case the author assumes causation between energy production/consumption and economic growth. The conclusion being that since we have a limited capacity to produce energy on Earth and a limited ability to increase efficiency of energy consumption, growth is therefore limited. Which is true, given the above assumption holds. Real world economics is known however for messing up assumptions, however reasonable.
He obviously added the efficiency to the pot. But energy use is one of the main factors of growth. That is one of the reasons why newly emerging economies from the third world feel like their growth is mutilated by all the requests for reducing carbon emissions.
Same reason why China decided to completely ignore the environmental effects, if they had fewer energy sources, their growth wouldn't be as gigantic.
It's quite interesting what will happen with India and with countries of the African continent. When they start enjoying their increased standards of living, they might want to use more energy, currently they are just a tiny speck of the world energy use.
China has actually become quite concerned about the environmental effects of their energy use. Not global warming so much as pollution, but the effect is the same: they're investing heavily in alternative and nuclear energy. Independence from fuel suppliers, becoming the #1 manufacturer of solar arrays and the fact that alternatives are rapidly becoming cheaper are also factors.
Maybe some of the now-emerging countries skip the oil/gas/coal phase entirely and go directly to renewables, in the same way that Africa skipped the landline and the traditional banking in favour of mobile phones and apps.
Alternative and nuclear energy use is still energy use. It may not create the same pollution as coal or oil, but that doesn't affect the arguments from the article.
Growth of energy use is unsustainable, and that may mean economic growth is unsustainable.
So what does the size or growth of an economy fundamentally measure, i.e. how do you quantify the size or growth of an economy without resorting to money at any point? This should help seeing things way clearer than thinking about how to grow an abstract amount of money.
Of course they apply but how and to what extent? CO2 is a GHG and we expect some warming in relation to its level. Where is the empirical data unambiguously linking CO2 production and levels to Anthropogenic global warming?
Currently we are talking about endless massaged data from various sources generating a global composite temperature of +0.28 C (about 0.50 degrees Fahrenheit) above the 30-year average for August in an El Nino year.
Well, I find it difficult to imagine, what laws of nature would apply to economics?
The best and most resilient example I know is the Black-Scholes equation - a framework to model option prices - based on a heat diffusion equation. Thing is, now it's never used with its original assumptions, but rather with a bunch of fixes. Oh, volatility isn't constant as we thought, let's add stochastic volatility. Oh, stock pricess are fat tailed and don't behave according to a geometric brownian motion, let's add discontinous jumps. Not to mention, that nobody uses historic volatility anymore. A hack of hack of a hack. So much, in fact, that the original elegant theory has just become a sort of convention, how everybody does their calculations.
I really don't understand the argument that laws that have been proven to work in one domain should work in another. I think it's a kind of quantitative mysticism.
1. Continued economic growth requires continued increased energy use.
2. Any energy source will eventually generate so much waste heat that the planet becomes uninhabitable.
3. Therefore, sustained economic growth is impossible.
How could the economy possibly plow through and ignore the physical limitations of the Earth? The author anticipates one might argue a larger portion of the economy goes to services of various points but suggests reasons this is implausible.
It's not entirely clear when and how we'll hit the theoretical limit of power usage either, particularly if efficiency keeps increasing. All this discussion is about hypothetical situations.
That is not what this is about. I have a problem when physical models are naively applied to economic models, i.e. "let's assume global supply is a liquid with variable viscosity" and the whole econophysics approach.
The article is not hardcore econophysics though, but basically a little bit of regression and then deference to physics without any economics.
I mean no more than I would by saying that Minds are affected by Biology in the same way that Economies are affected by the physical world. One supervenes on the other. Just as it is nonsense to say that Psychology is independent from Biology, it's nonsense to say that Economies are independant from the physical realities which underpin them.
I'm not sure what "quantitative mysticism" means, but I'm not proposing anything quite so social-science-waffle sounding.
Several of the commenters below the article do a pretty good job of pulling the article apart because its assumptions simply aren't very good even when faced with today's data (and in the case of aircraft efficiency, are simply wrong). It's so well established that growth in energy use and population have slowed sharply in the industrialised world, and that energy use per unit of real GDP is falling sharply that any argument based on the assumption of constant, exponential rates of growth that doesn't address these points is utterly facile. His assumption that "a certain, finite fraction" of the population must be engaged in agriculture also seems to overlook the fact that this fraction has fallen sharply over time, and has plenty of scope to continue doing so.
The assumptions fundamentally aren't reasonable; they're considerably less reasonable than Malthus' arguments that economic growth could never outpace population growth in the first place, which were at least written just before world per capita output started to accelerate.
If economics isn't a hard enough science, then getting physicists to do the theorising instead doesn't seem to be helping ;-)
Then just view it from a different angle - there is only a finite number of people on the planet, they have finite lifespans, they can only consume a finite amount of stuff.
A finite physical amount of stuff doesn't mean that people won't pay ever increasing amounts for stuff marketed as "better", which is all the growth that's needed for real economic growth patterns to continue, even if "better" requires the same or substantially less energy usage. It's probably a failure of imagination to assume that even the rich nearing the limits for stuff we want to consume too. The amount of GDP spent on healthcare is rocketing in developed nations, not all of that's all down to predatory companies and over-regulation, and it's perfectly rational for people to continue to spend ever-increasing amounts on factors which most significantly impact their quality of life. I also think we've barely scratched the service of what can be done there in future...
Economic growth is not fundamentally measured in units of money and especially paying a larger amount for the same thing does not constitute economical growth. Adding an additional zero to all bills is just a rescaling of units, it has absolutely no substance.
Video video games are part of GDP when in game stuff can be sold. With player power inflation being a thing, GDP becomes unbound. Note this works even if computing resources stop increasing because introducing a blue ray gun that's better than the green Ray gun does not take more FLOPs.
Wouldn't the same level of rationality required to create and sustain that huge and complicated marketplace, when applied to a micro level prevent all the participants from wasting their lives trying to acquire blue ray guns?
>> video games are part of GDP when in game stuff can be sold. With player power inflation being a thing, GDP becomes unbound.
I look forward to a future where most of the economy is optional and I can walk away from it and retire in complete comfort. Hint, we're getting there and if you're not building real wealth you're going to miss it and be FORCED to play video games to pay me rent on the physical world you take up space in.
Luckily, simply rescaling the bills is exactly what my post didn't propose.
Buying Photoshop instead of using GIMP or Abercrombie instead of George consumes little or no more real resources, but by any regular measure of economic growth it's an increase in real output if people switch. Same applies to people buying shiny new Teslas that consume less real resources than the low-end Ford they used to drive. Or indeed, as I hinted I suspect will increasingly be the case in future, people spending sizeable proportions of their income on cures for chronic ailments that take an relatively trivial amount of energy to implement. Economic growth is fundamentally not measured in units of energy.
All you've done is scaling games. Eventually you still hit a physical wall.
For my relaxing woodworking hobby I have a midrange table saw. In eternal economic growth I could improve my hobby by buying a much better saw, a giant cast iron table beast with 2 HP motor and a kilobuck fence system and kilobuck dust extraction (instead of my cheap hundred buck system) maybe given infinite money something better than current top of the line, or better than can currently be imagined, could be sold to me. Fundamentally there is a limit of the theoretical best imaginable table saw. At that point economic growth ceases. This also happens with cars and houses. It does not appear possible to design and build a car that is road legal better than a couple million dollars, given income inequality we should be able to charge $25M for a super car and there would be plenty of sales at that level, but engineers can't find a way to spend that much even on custom cars.
But you argue the perfect table saw could be value engineered to fail often. OK then, you bought yourself a couple more orders of magnitude of economic growth but still hit physical limits. Now I replace my saw every time I use it, heck, every cut I make. Eventually there comes a fundamental physical limit to how many boxed saws I can slide down my basement stairs. So you implement drone delivery of table saws. OK then we run into a limitation of living in a 3-d universe, where the lifespan of my table saws are so small I can't deliver them fast enough to make money producing more of them, and the waste heat is so high my skin burns.
Now at those fundamental physical limits, how do we increase economic activity?
There is another fundamental physical limit based on income inequality. If you take total income or wealth across the country and divide it equally, perhaps everyone in the USA could buy a table saw like mine, today, which sounds awesome, because fine carpentry is fun as an art form, etc. However we concentrate all our income and wealth at the top. And none of us (statistically) are at the top. Eventually like the last days of the Roman Republic we'll have all the wealth owned by one dude. And if Dude doesn't like carpentry as a hobby, and no one else can afford even the cheapest of table saws, then Dude can increase his income and wealth into perpetuity but table saw sales will drop to zero permanently, even if the plan was to eternally sustain economic growth by making and selling table saws. This is our medium term future. The economic problem with income inequality or our current return to feudalism is that the one dude at the top can't spend money fast enough or wisely enough to keep the economy alive, much less eternally growing. And if a detailed analysis of economic conditions shows that for a couple generations all we've been doing is transferring wealth upwards to the rich rather than actually being productive, then obviously that has to stop once there is no more wealth to extract from the peasants, even if for a couple decades, reports of economic activity look very busy. Its like pumping oil out of a well and thinking the well is bottomless, for a little while you can "create" oil and oil wealth out of nothingness, but eventually you run into a problem with that business model once the cheap oil is all pumped out.
Economic activity is just a way to keep score in the competition to use energy and resources ever faster, well, ever faster until it isn't anymore.
I could imagine someone making a similar analogy to yours half a century ago... "there's only so much you can improve my table saw, and there's no way I'll ever have other hobbies involving complex computers manufactured halfway across the world in my pocket... never mind my hobbies also involving monthly-fee subscription apps which employ hundreds of programmers and creatives to produce stuff I never knew I needed"
I think it's pretty ludicrous to suggest we'll reach the limits of the growth potential of human [conspicuous] consumption at any time in the foreseeable future, and frankly if it starts to look like a serious problem any time in the next five or so centuries we might even have enough disposable income to pool to create a non-debt/inflation based financing system so we don't lose all our savings. Assuming we still care about our savings. :-)
I actually think the tendency of wealth to concentrate which you've also mentioned is a bigger problem, but we already have large-scale direct and indirect redistribution of incomes and I don't see future electorates voting for the party that lets the [competent] descendants of todays' billionaires continue to accumulate all the wealth.
The question is not how much the saw costs, or how often you replace it.
The question is what you can do with the saw. As you note, fine carpentry is an art form. There's no limit to the possible value of the art you could produce with the saw and other tools. There's no limit to the possible total value of the art that could exist in the world.
Actually... yes there is. At least there is a limit to the economic value of art. Given a finite human population with a finite lifespan (also implying a finite rate of reproduction), there is only so much attention that can be given to any form of art created. If a world would start creating art non-stop (which is pretty much what is happening now) the economic value of an average piece of art must drop to zero for the simple reason that people haven't the time to observe it. (Assuming that art can only be valuable economically if it is observed, which is kind of optimistic actually). Also pretty much the state in which we find ourselves now already.
A finite earth can support a finite population which can use finite resources to employ a finite economy. I'm not sure what's difficult about that concept; especially since a zero-growth economy is not a new concept (it's called 'maturity' when applied to an ecological system).
You can't just wave your hands and say "I think this number is small, so I'm going to call it zero". There's an infinite difference between any nonzero number and zero. And in fact, the economic value of an average piece of art is obviously not zero. I'm not going to bother to try to estimate it -- do any 3-year-old's scribblings count? -- but it's not zero.
You're also overlooking the rather obvious and important fact that the quality of different works varies tremendously. While it's true that appreciating art does require some time, the amount of value I receive in return, and therefore the price I'm willing to pay, is a function of (my perception of) the quality of the work. And it doesn't necessarily take me more time to experience a higher-quality work than a lower-quality one.
Aren't digital works fast approaching a value of zero? Taylor Swift is pissed she doesn't get paid enough from Spotify, but perhaps her music is worthless because there's already so much music available (the more abundant a resource, the lower its value). Attention is now what is constrained.
Healthcare is currently ~20% of the economy and rapidly growing. But the end game is probably highly effective drugs, highly effective diagnostics, high degree of automation ,and maybe even life extension - and those will probably offer great solutions to most major medical problems.
And after patent expiration, many of those technologies could become very cheap - because they are either dealing with information(i.e. labs on chip) which generally has moore's law like economics, or dealing with giving minute quantities of materials to people - and making that is either very cheap today - or synthetic biology would probably make it very cheap.
So i'm not sure healthcare will be a growth engine.But maybe living to 150 or forever will offer a lot of growth.
Once you start getting into these sorts of assumptions about trends and correlations, you really have to have a good understanding of all these inputs. They are all suspect to different degrees across different time horizons and scenarios.
What you really have when you put together these predictions is "Given A,B,C & D, this Y is likely to be whatever." That only works when you understand A,B,C & D quite well and keep them in your head. It's also bait for our biases and grand worldviews.
I had this massive argument 10 years ago with a politically active friend on the left. He was/is a sort of modern socialist-environmetalist. He brought up exactly this energy-gdp correlation and was extrapolating a log way into the future. It also played into his general sense that GDP growth is an unbecoming central goal for a society and that economic progress is at odds with the environment.
It's not a nonsensical perpective. That correlation is relevant. But, you need to get into the subtleties.
Even the concept of "economic growth" is an abstract thing. GDP as a measure of economic output is becoming less and less useful metric. Wikipedia consumption contributes nothing to GDP. Some kid torrenting game of thrones contributes nothing to GDP. These things have value, but monetary exchanges are not good proxies for them.
Even within the "energy intensive manufacturing" paradigm, an iphone's utility-to-energy cost ratio is a funky thing to try and fit in to the GDP concept which ultimately uses money to measure value. A 2015 iphone is worth more than a 2010 iphone. You can see this if you try to sell one and if you could go back to 2010 in time with a box of 2015 iphones you would see it as well. But beyond that, trying to do price adjustments (which are the basis of "keeping interest rate constant") on a rapidly developing technological product puts you in the weeds.
This complexity is exactly why these correlations and trends are interesting They cut through the messiness. I think we should still do this. But… you need to treat these in the same way you'd treat Kurzweil's theories. Interesting, but built on a lot of unknowns. Too many to make you too confident.
Yep. Kurzweil's theories are very similar. Also the Drake Equation. Great for late-night BS sessions, and maybe a fine thing to put some faith in -- but it ain't science or logic.
"...I had this massive argument 10 years ago with a politically active friend..."
Reminds me of a similar story. Worked with a guy many years ago who was a double major, math and physics, I think. Brilliant guy. At the time, he assured me that now was the time to get in the market and bet on oil prices going higher. Peak oil was here! Shortages and chaos were upon us.
I pointed out that peak oil had been called many times over the years. It was doubtful we were on that exact spot. In fact, some economists have even said that anything you can dig out of the ground is bound to go down in prices as extraction technology continues to mature.
He countered by showing me a study from the U.S. Defense Department (I believe), it showed that yes, indeed, oil was going nowhere but up. I pointed out various examples of this type of thinking failing in the past. He pointed out that things can't continue on forever. Draw a trend line. There's no way that line can continue. Does this discussion sound familiar?
We agreed to disagree, and I promised him that I would wait a few years and email him. We would revisit this discussion.
Several years passed. Oil was not through the roof. In fact, IIRC, it was about in the same spot as it was before. So I emailed him. I asked him how he felt about his earlier assessment.
I did not get a reply.
Since then, of course, we have the advent of fracking, and the clear possibility that the U.S. is going to end up as a petroleum exporter, at least for a while.
Faith is a fine thing. Heck, I'm a singularian, although I think we're looking at 300-500 years. But it's very important to be cognizant of those things you take on faith. Otherwise you end up having these long discussions in which your main defense is just repeating something along the lines of "science!" or "math!" over and over again.
An interesting thing about Kurzweil's timeline is the 2045 singularity awakening date. It's conveniently scheduled around the end of his life, assuming medical technology extends life expectancy at his age to around 100 years.
That said, I think what Kurzweil does is interesting and valuable. In fact, being so stridently futurist and speculative makes it a lot more honest than a typical "think tank" economic scenario predictions. You go into it with a much more assumption challenging type of good skepticism and engage with the unknowns.
What makes you think 300-500 years?
If we're talking 300-500 years, I'm lost. Compare 2015 to 1515. Consider accelerating rate of change, I think 300-500 years takes us outside of any kind of timeline we can map historically.
I believe hard AI is going to be a lot more problematic to map out than we currently might think. I believe we're in for a push-back against overly-intrusive computer monitoring, which should slow down AI development. I also believe that "intelligent", "kind", "moral", and "useful" may also be much more mutually orthogonal than currently believed. Finally, mankind really needs to work through the period where mid-level AI could either exterminate us or love us into extinction. That's going to take some time to work out.
If you spoke to your friend 10 - 20 years ago, then he was right. Perhaps he imagined faster and more catastrophic dynamics, but inflation-adjusted Oil has been going up since 1998 [0]. If you had taken his advice and invested in oil futures in 2009, you could have become rather wealthy :)
Of course, there have been impressive price fluctuation (One happening right now). But it's kind of expected in a highly complex system where technology, politics and financial crises interact in rather unpredictable ways. On average, I still think the trend is UP (and the "fracking miracle" will be a short lived spike). Peak Oil will happen (but predicting the date or dynamics inside a 20 year range is just as hard as predicting the timing and depth of a financial crisis).
Trying to measure the size of the economy "faithfully" is not possible. You can create abstractions like GDP that are useful where they are useful, but you can't treat them as solid concepts.
When the "IQ" debate was hot and contentious, people often ended up with a tautological definition that measured IQ is whatever IQ measures. This is because "intelligence" is not a solid concept and the test is not a direct measure of this fuzzy concept anyway. That doesn't mean IQ is meaningless. It has predictive power. It can serve as a goal (unless you game it and make it useless).
GDP is a measure of transactions, ultimately. That tends to correlate with the size of an economy and can be used for comparison, if everything is structurally similar. You can compare France to Sweden. If you are trying to compare the economic output of Monaco to Zimbabwe, GDP is not as good. If you are trying to compare the economy of today to the economy of 1836 or 2065, you're also in trouble. If you want to compare the economy of an alien civilization to ours, GDP won't work.
Referencing GDP (or anything else, this is just an inherently hard problem) in these contexts is trying to squeeze some useful information out of a very limited and buggy tool. You need to understand the subtleties of it. What it does well and poorly.
Most importantly, accept that our tools and therefore knowledge is limited.
This would argue that economic growth is to a significant degree subjective, which would be consistent with the basic thrust of the original article. Economists once predicted that energy would be basically free, which turned out to be badly off base. Whether life can be made continuously better may be an open question, but the idea of essentially all major forms of scarcity disappearing due to never ending economic growth is cast into severe doubt.
One thing oft asserted in economics textbooks is price as an "information signal." That is, if we step back from its various origins that tie it to land, labor, and energy, pricing has similar utility to any other valuation method. A person using extremely expensive equipment that is owned by an institution cannot value it within their individual budget, even though it has a "price." The cost of access is the membership in that institution, which is not the same and may be priced in terms of service hours or political weight.
As our economy hits more extremes of abundance vs. scarcity, decoupling of value mechanisms is a likely future step. Mainstream economic theory already has some accomodations for types of goods and externalities - it's not too radical to imagine a theory that recontextualizes them.
I don't really have any strong opinions, but I tend towards the "no relevant natural barrier" to growth side.
I think free energy in the sense that Facebook is free, is still a possibility. But, I think what we previously failed to envision is the depth of our consumption ability. If by energy, you mean the energy needs of a home in 1915, that's an achievable goal. But, the goalposts moved. Energy has been a constraint though, not the best example since we have't had good progress relative to other things.
Consider food though, the basic consumption good. In pre-industrialized times, calories so cheap that they're free would have been a "singularity" like end goal. "Free food" in the form of a box of grains with sufficient calories would be perfectly doable if people wanted to do it, <$100 per year.
But of course, we consume far more that $100 per year of food. It's just that calories are not a good measure of food anymore.
Education, at whatever quality can be delivered without a teacher will be free. Housing isn't on any kind of virtuous curve, that's a resilient cost.
Computers are getting close to "free." A Rasberry Pi is (on the scale we're talking about) essentially the same as a Macbook Pro. Even a fully cased and packaged laptop is moving towards free, at least in the sense that thumb drives are free.
On one hand, I do think a lot of things can get so "abundant" that economic models ultimately break down entirely. Anything that is entertainment, information, education can be free. Anything that's a physical manufactured good like underpants or iphones can get so cheap it might as well be free.
On the other, some things (housing) might prove more resilient to to accelerating change. Others things will discover levels of demand for more "quality". A 1996 cell phone for free is a bad deal relative to the $300 alternative. Basically, there are things we will want that still cost money. Another way to put this is demand distancing itself from "need." We need some stuff (food, water). Some stuff is a matter of definition (education). Some stuff (game of thrones) is squarely in the "want" bucket, but the want bucket produces economically identical demand.
The thing that makes GDP unsuitable in my view is that it measures destructive activity as being equal in value to constructive activity. You tear down a house, build an identical one in its place, and while nothing of value has been created, the GDP has received a sizable boost. Yes, people got paid for doing those things, but it would have been better had they been paid to produce something of value instead.
It's not an invalid example. It shows that GDP has some weirdness. It's just not a scenario likely to be common enough to cause problems. But, it does demonstrate the leaky abstraction.
There are also scenarios that break GDP but not homo economicus logic. What happens when a woman starts working and paying for childcare? Do you subtract the childcare she is no longer directly providing as negative GDP? Do you just add on this new service as growth, even though the kids are not getting and more hours of "childcare?" This is a real problem with data pre 1960s and post 1980s. GDP can't measure those.
That's the economic equivalent of bulldozing a house and building a new one. There's a surplus, economic or otherwise but there is an unmeasured destruction too, parenting hours are reduced. We only count paid work so when one increases at the expense of another, the GDP abstraction leaks.
What happens if important new products and services are free, like Wikipedia, Khan Academy, etc? What happens when you can buy a £500 android phone for £200? Do you do an inflation adjustment that counts the value of all £200 iphones produced @ £500?
The real world mixes these up in ways that GDP can't really handle.
If one looks at this more broadly, the examples you bring up have to do with the fact that not everything can be reduced to monetary or market exchange (a distressing thought to some libertarians). This is more of the underlying problem than GDP itself which is "just" an accounting equation... Which is hard to use when there is nothing to account.
The question for society is , does this even really matter? We never used to subject ourselves to economics and markets as the totalizing sphere of human achievement, it was one of several areas of social organization alongside community, politics, family, religion, etc. We only start caring about this stuff when we want to compute dubious universal ultility functions and the like.
This is a little unfair to (intelligent) libertarians. A similar argument could be made for socialists or welfarists. They all rely on "economics" in the sense that they are quantifying and describing the dynamics of economic activity. Thoughtful libertarians know that these measures and models are representations of reality, not reality.
In fact, a fairly important figure in "neoliberal" thought is Hayek. Hayek (and Hayekians) argue that not only is the economy difficult to quantify and describe formally, it is impossible. In his frameworks price and choice are conveyors for knowledge.
I would even say that the most serious hubris in this vein has been the Stalinist and Maoist "5 year plan" which aimed to quantify economies in accounting terms.
I agree with some of your points: it was a little unfair, and Stalin and Mao certainly had great hubris. I tend to view libertarianism as the next desired grand social experiment: the Marxism of the Right. This leaks out via dry attempts at humor. Perhaps it won't be a disaster; I also admit I should be more respectful in a debating forum.
As for Hayek, I don't think he is unique in the view that price is about knowledge. While Hayek was the more readable and reasonable one between him and Von Mises, I'm aware the Austrians don't really believe one can scientifically study the economy, but I also think there is plenty of evidence that has refuted this: we can quantify and describe a large subset of the economy with predictive power.
It's well-known that GDP is susceptible to the broken window fallacy because it doesn't measure destruction of capital. Consequently, it dramatically overstates the GDP of resource-rich nations. When Saudi sells a barrel of oil, that $75 is counted towards its GDP. But the actual value-add is $75 minus the value of oil in the ground, which is a much smaller number.
Perhaps more clearly, GDP doesn't distinguish between productive and unproductive activity.
The government could pay people to dig ditches and fill them back in, and that would contribute to the GDP even though it was a complete waste of effort and a net negative considering the opportunity costs.
I think a better example would be: paying to have a house built and then paying to tear it down.
Another good example could be: think about the cost spent every year for lawyers to write EULAs or liability waivers that nobody reads, or to file tax returns that comply with our super complicated tax code. If the underlying legal system was simpler and/or less friendly to these liability lawsuits, the same effect could be had without needing any of those legal/professional billable hours.
Here's a good (but long) resource for anyone who wants to understand how and why we have come to use the conventional measurements of economic growth that we do:
Giovannini (former OECD Chief Statistician) has this to say about the future of economic accounting:
Looking to the future, it is possible to identify
certain trends in the demand for economic statistics that will presumably strengthen in the years to come. In the first place, demand will focus more and more on the services sector (which already accounts for over 70% of GDP in many developed countries), with new forms of
production playing a more important part. The measurement of “intangible” activities will take on increased importance and this should bring about greater integration of economic statistics with social statistics: concepts such as those of human and social capital are already generating interest and becoming the subject of quantification, albeit still in embryonic form.
The question is actually based on the false premise that value can be objectively measured/quantified.
In fact, value is purely subjective. In other words, the value of 'Wikipedia consumption' is only what each individual places on it.
For example, someone may find Wikipedia valuable in pursuing his quest for greater knowledge, whereas someone else is completely uninterested in 'consuming' it (and doesn't see Wikipedia as valuable).
In a nutshell, the value of X is its subjectively perceived utility as a means towards an end.
It adds to human capital, which we can't quantify as of now.
I'm not sure if we'll ever find a good proxy for how much information is worth as it is an extremely heterogeneous, intangible input that goes through a complex, unstructured, and not-fully-understood process (the human brain) in order to create value in the world that we can measure using money as a proxy - a company's revenue, for instance.
I don't think that the author assumes the causation that you mention.
He says that growth is composed of two parts. One part depends on energy production/consumption and the other part does not -- If you don't like the causation ''energy consumption implies growth'', his theory still holds if you assume that the second part is more important than the first.
Because our ability to be energy-efficient is bounded (even if his numbers are imprecise it's difficult to argue against this -- as our stuff cannot be more than 100% efficient), it means that the part of growth that does not rely on energy must take a disproportionate share of the total growth if you look far enough into the future.
It precisely seems to me that the assumptions he makes are remarkably minimal.
But then you can't make a statement that the growth is bounded, unless you assume that "everything else" is bounded as well. And that's a hefty assumption.
I've understood the energy argument as central to the article. Hence the "causation" in my original comment.
It blows my mind how far people will go in order to protect the schema which they use to interpret the world. Take a look at yourself, you are bending over backwards attempting to dispute something which is unbelievably obviously true. Unbelievably Obvious. Blows my mind.
Some categories (the article mentions psychotherapy, for instance) use very little energy, although they also have output whose value is harder to measure.
>> I'm always a bit weary, when people rely on physics or rigid math to derive economic conclusions. In this case the author assumes causation between energy production/consumption and economic growth.
No, the author assumes energy as a prerequisite for economic activity - not a cause. That much is true. There are no significant economic activities that do not depend on energy. The author even suggests that more non-energy activity will be required to sustain economic growth and has a hard time with that.
You're right, except for your statement about the causality between energy and production is more of a Totally Obvious Fact then it is the "assumption" you make it out to be.
Almost all of production in a modern economy comes from machines. Machines have been utilized to augment both manual and intellectual capacity. Machines require energy. Therefore our economy runs on energy.
Think about it. Why do most people have jobs sitting on their asses typing on a computer instead of searching for food and doing other obvious things related to survival? Because machines are doing the work for us! Because Energy!
Let's be real, it's really hard to find an occupation that doesn't involve an energy consuming machine.
Take for example: Food. Factory farms, tractors, pesticides all guzzle gasoline like crazy. People assume that if gasoline disappears, you can just start biking to work. The reality is, if gasoline disappears, people will begin to starve.
Another example: Big Data and IT. What do you think those servers are running on? Hopes and dreams or Energy? Take your pick.
The cities of america are constructed in ways so that the laborer must get in a car and consume a bunch of energy just to get his ass to the location where he actually does work... Our entire infrastructure is built around energy. It goes further then that, our urban infrastructure is built on the assumption that energy is limitless; suburban infrastructure relies on gasoline, once that's gone, so is suburbia.
Modern civilization and energy are intrinsically linked. The same way green house gasses and global warming are linked. There is no controversy. Period.
In short economic growth is Bounded by an upper limit and that upper limit is indeed energy.
In Boolean terms yes. However, a software engineer who writes a hello world program in an hour and a software engineer who writes a ML based high frequency trading algorithm in an hour produce vastly different outputs, but consume the same amount of energy.
Energy is a factor of production, just like labour, or commodities, or management. I can take another Totally Obvious Fact and say that growth is caused by the size of educated labour force... Assuming that energy is the defining factor of production either requires justification, or is just an assumption.
Very nice article, along the lines of The Limits to Growth.
It is a big question if technology can solve all of our problems.
Technology is definitely a part of the solution but human mentality has to change. Most of the people care about their preferences and standards of living, they do not care to look, nor are they interested in participating in solving the problems of the global scale. When this is the case, it's quite hard to shift to something more sustainable.
Through my readings about sustainability I've always been left with a very weird feeling. I'm perfectly aware of what the subject is about, but I can't seem to find any solution that would divert us from the current path, and authors are mostly just commenting on the current situation, being themselves perplexed by the possible solutions.
Despite my last name, I'm skeptical about predictions that growth will foreseeably slow down or cease entirely. I believe it was Jim Manzi who coined the concept of the "Icarus Fallacy," in which the experts of each decade invariably predict an energy crisis 30 years hence — just after they will die.
Does this demonstrate that current, analogous predictions are false? Certainly lot. But Bayes theorem dictates that the similarity decreases the confidence that one should have in contemporary climate science.
I have neither the time nor the inclination to remain current on cutting-edge climate science. Whenever I check in, I find that the critics seem to be getting the better of the argument. But I profess no expertise.
I do, however, consider myself reasonably qualified to opine about the state of AGI research. And, despite more than a decade of trying, I have no idea when to forecast the emergence of AGI. I would not be shocked if it happened tomorrow, nor would I be surprised if it occurred 300 years from now — or not at all.
I am, however, confident that the emergence of AGI will radically alter the state of the earth, thereby rendering virtually all pre-AGI predictions worthless. The population trends of Africa mean little if some Western nation unleashes a digital demi-god capable of reshaping the earth in its image.
The IPCC's failure to account for this effect, which I believe in quite strongly, does not inspire confidence in the reliability of its other data. I do not, of course, mean to imply that it would be reasonable to expect an international panel on climate change to address the risks from artificial intelligence. But that is because there are so many different contingencies that it is silly to make projections so far into the future. It is not at all clear that an energy crisis is even the greatest existential threat that modern man faces.
> I do, however, consider myself reasonably qualified to opine about the state of AGI research. And, despite more than a decade of trying, I have no idea when to forecast the emergence of AGI. I would not be shocked if it happened tomorrow, nor would I be surprised if it occurred 300 years from now — or not at all.
I'd be surprised if it comes tomorrow. The leading scientists have little belief that their current methods could be easily adjusted for AGI. All of the leads in AGI currently can't even simulate the problem solving skills of C. elegans. There's not a single AGI project that accomplishes the same skills of a specialized model.
If, as you readily admit, the emergence of AGI would radically alter the whole state of Earth in ways that can't be predicted, how do you expect the IPCC to account for it? Essentially, all they could say would be:
"If AGI doesn't happen, we predict [current predictions].
If AGI happens, who the hell knows?"
You can't account for something which can't be accounted for.
That's my point. The limits on our epistomological capacity are greater than advertised.
Sadly, this is not a trivial insight. The obstacles to clairvoyance privilege immediacy over wisdom, because it radically limits the number of possible permutations.
The solution to uncertainty is not an obsessive focus on one discrete risk, like anthropogenic climate change. Instead, it necessitates a focus on the factors that provide the most robust protection against a broad array of risks. Objectively, the single factor with the greatest relevance to the entire body of existential threats is economic growth or, at minimum, annual economic productive capacity, for it enables effective adaptive responses to myriad crises.
The limits on our epistomological capacity are greater than advertised.
I would say that's because the obvious is assumed, so there's no need to advertise it. Nobody expects the IPCC prevision to hold if a singular event happens, so what would be the point of underlying that fact?
The solution to uncertainty is not an obsessive focus on one discrete risk, like anthropogenic climate change.
It's the Intergovernmental Panel on Climate Change, what do you expect them to focus on?
You wrote: "The IPCC's failure to account for this effect, which I believe in quite strongly, does not inspire confidence in the reliability of its other data."
But there is no reason for them to account for something that can't be accounted, and it makes no sense to criticize them for focusing on what they've been created to focus on.
to me this reads as "i have little faith in 99% of the expert scientific community has to say.... but here's a batshit crazy theory which I think is a dead cert"
I prefer to rely on my own understanding of the relevant science, rather than glorified opinions polls. It troubles me when this leads me to conclusions that veer from the mainstream, and I certainly include that fact when I analyze the probability of their veracity. But, try as I may, I remain convinced of my current positions, based on the available evidence.
If economy grows 3% per year and efficiency gains are 3% per year, energy consumption does not grow until we hit the floor where increasing energy efficiency takes too big investments.
In practice demand and size of the markets limit potential for growth more than physical limits. Population is important factor both in supply and demand.
Even if automation increases, people as the source of demand are important. Investing into microprocessor plant that supplies 10 billion people has different risk and profitability than building similar plant to supply demand from 5 billion.
So linear growth starves the economic beast, and would force us to abandon our current debt-based financial system of interest and loans.
Debt, interest and loans are not dependent on economic growth. Debt is fundamentally about reducing the latency between consumption and production; rather than having to wait until after you've produced something of value, you can consume some of that future production today, in exchange for promising to divert some of that future production. There's nothing here that requires the whole pie to keep on growing.
If Fred and Ginger are an economic system whose total value at time t is $1000 (all of which is in Ginger's bank account), and Ginger loans Fred $500 on the promise that he'll pay her $600 at time t+1, then their agreement is predicated on the assumption that the Fred/Ginger economy will have grown 10% at time t+1.
In that case Fred could simply pay her back the $500 and she would value it at $600 (ie, deflation). He has to pay her back $100 more in real value than he borrowed, so sometime between t and t+1, someone in the system must produce $100 in new wealth.
I don't see the problem. Fred can sell his time/labor to make up the difference. If that is not possible for some reason, Fred could also default on the debt. Then the lender takes what she can get and learns not to make loans that cannot be repaid.
Fred can sell his time/labor to make up the difference.
In other words, Fred can bring new wealth into the system, yes. If he defaults, then Ginger learns that a key assumption of her loan---that the wealth of the Fred/Ginger system would increase at time t+1---was wrong. Which is exactly my point: that our system of finance relies on the implicit assumption that the economy will grow.
Fred can create new wealth simply by dancing to Ginger's tune for an agreed period of time. There is no limit on the amount of "wealth" that can be created; as long as there are economic actors in the system, their action is wealth generating if it is done in exchange for money.
See my answer to mrep above. There's no net increase in wealth there, Fred and Ginger merely shuffle money back and forth. And some of finance is exactly that. But some portion is not (ie Ginger loans out $1000, leaving her nothing to pay Fred with, and he has no interest in her services); that fraction of outstanding debt must be paid with new wealth, created in the interim. Ginger's loan is predicated on that possibility.
No, Ginger could take a small nap and pay Fred a 100$ to do some work for her that she would normally do. Then, Fred would have 600$ to pay her back, and the economy's output would stay the same.
True, and some portion of lending is no doubt exactly that kind of shuffling. But the total amount of debt also includes some proportion of Gingers who lent more than they can nap off.
And in fact debt was ubiquitous long before the Industrial Revolution happened and economic growth increased to rates that made it comparable to the interest rates on debt.
disclaimer: I haven't read the article very well. If you don't feel like reading some drivel don't read any further.
My hunch is that this is the wrong question to ask. Tackling economical issues like this is like wanting to start working out and then spend all your time discussing the best(TM) fitness routine online. No amount of math will save us. After all those years of rapid economical and technological progress we have to acknowledge that it's the human factor we have to work on the most.
Economic growth is a tool and we can not use it very wisely as we haven't figured out our society's real needs all that well. We lack collective tacit knowledge so to speak. That what we can codify (at least at the moment) isn't enough to solve our problems.
But I think the author is right that a zero-growth economy should be the goal. Because only then resources of all kind could be perfectly allocated. However, this assumes that the perfect allocation of resources is a.) possible and b.) desirable.
A criticism which seems to be gaining traction is that many traditionally held economic beliefs were not sufficiently established by data, with their adherents often being satisfied with a (single) model, consistent with a limited set of observations. The rise of advanced statistical methods with vast amounts of data is a relatively recent phenomenon.
A purported major factor in the collapse of Lehman Brothers was that their economical models failed to anticipate a dramatic drop in property prices because they didn't include data reaching far enough into the past.
Much of the machinery for large scale data analysis was developed in the context of trying to understand complex physical systems. Even basic linear regression has its roots in the study of celestial mechanics by scientists such as Laplace and Gauss. Von Neumann was the co-creator of game theory, John Nash proved its foundational result. Economics is not beyond the analytical abilities of physicists and mathematicians to investigate, although certainly they benefit from collaboration with domain experts to resolve basic misunderstandings.
Ignoring energy and entropy in a dynamical system does seem a bit curious. It's not really clear that GDP can be made both rigorous and meaningful in the sense of these thermodynamic terms. David Goodstein points out that oil companies haven't produced a drop of oil in their entire existence. They simply process the oil which biophysical forces produced over a hundred million years. This oil (and all other fossil fuels) will run out in something on the order of 100 years. After this, civilization will end. I find his prediction difficult to dismiss, although not a foregone conclusion. All the solutions to the problems Goodstein raises remain speculative.
There is several hundred years worth of coal in the ground. Further civilization only started using oil very recently. It's loss mipay seem huge but it's not that important.
Since our energy consumption has grown exponentially in modern industrial times, most of the energy consumed has been during the age of oil. Further energy is not the only dependency modern civilization has on oil.
You can't glibly dismiss Goodstein's analysis. He addresses this belief (canard) that we have hundreds of years of coal in the ground, or that the resource limitations which restrict the future of oil do not also apply to coal. To replace the energy, fuel, industrial and agricultural uses of oil, coal consumption would have to increase by at least 5x, with catastrophic environmental consequences. Goodstein also points out the unreliability of estimated reserves, which in many cases are political rather than scientific.
Actually farming still consumes vastly more energy than oil has provided. 1kw / m^2 is a lot of energy even if plants suck and significant parts of the globe have been under cultivation for thousands of years.
Wind is already cost competitive with coal. Sure, if oil was going to run out in 10 years that would be a huge issue, but when we have 50+ years to deal with the issue and it's bound at ~3x current costs it's just not that huge of a problem.
PS: The navy is interested in this because shipping fuel around is a major issue for them where nuclear reactors can provide plenty of energy.
Yes, it can, if we keep being ambitious as a species. I believe we did not even touch the real potential so far. There is an entire Universe out there, incredibly hard problems not yet solved (i.e. aging), are we really saying that this is it? I believe not, so economic growth will not only last, but it will be even higher if keep pushing our limits.
The fact that growth is really the only way. If you think about it, everything we achieved has been through growth (i.e. how China managed to bring millions from below the poverty line in few decades). We face enormous challenges (i.e. 7 billion people on the planet), without growth we are pretty much doomed.
So, it's not so much about confidence, I think is rather hope for us as a species.
To answer the title: Yes, because population growth can, in theory, continue indefinitely. Assuming, of course, that we're not restricted to one planet. :)
I mean --- sure, fair. "Indefinitely," was the wrong word if we're going to be pedantic. But there's certainly orders of magnitude more space and available energy in the Universe than on Earth alone, so we're not restricted to just growing on this planet.
Of course economic growth can last. GDP is just a number, in nominal currency, that measures not just sheer output, but also efficiency, technological progress, etc... In an idyllic future, when we're no longer extracting oil from the ground, no longer working manual labour jobs, etc..., economic output may reflect technology and ideas being created, the dollar will be worth much less (thus more nominal output), and as long as people are engaged in some form of economic activity (buying something, working in any form), we'll have measurable growth.
Nominal GDP growth and real GDP growth are very different things, and it's the latter people are referring to. If it was only nominal that mattered, we could have a arbitrary economic growth through inflation.
Even 'real' GDP numbers are boosted by inflation (ie. the price levels of everything rising over time, not just the devaluation of currency). Real GDP is still just a number to compare output between two points in time, still measured in nominal currency (albeit inflation adjusted for say, a 15 year difference). The calculation of 'Real' GDP still is limited, only useful for comparison purposes.
Several generations ago, some of my ancestors (my great grandparents) came here and bought their farmland for $10. Now I can barely buy a beer for 10 dollars. Yet we don't measure GDP in 1900 dollars, or in year 3000BC shekels.
Regardless, in many ways, my beer today IS worth more than a farm in 1900. My beer was made because of generations of farmers growing grain, building up their homesteads, brewers buying equipment and employed generations of employees, farming equipment improving efficiency, and everything else that goes into the supply chain. Simply put, the value of technological progress is built into current price levels.
I can assure you Mike, Once we stop extracting oil from the ground, EVERYONE will be returning to life a manual labor. The only reason why you aren't doing manual labor on your job right now is because of oil.
Because oil is the only source of energy we have, right? Things like nuclear energy, geo-thermal, hydro, wind and solar don't exist. And there's no chance of creating a technology that allows us to produce even more power, say, nuclear fusion...
Regardless, I did mention an 'idyllic' future. Obviously we'll be burning fossil fuel for the immediate future.
i want to point out just one thing - the problem is not in banks per se, the problem is merely in the expectation that interest rates have to be positive ;)
Is the "but at that kind of energy output we'll boil the planet" limiting case really a hard limit though?
If we're at the stage of having super-dense energy sources and super-tech, couldn't we we use those to cool the planet effectively?
Use a heat pump to move that heat off-planet? Drop some icy asteroids in the seas? Take compressed hot atmosphere off-planet in super-blimps, run it through a heat exchanger on Titan and then bring it back?
In the end the resources available to a civilization can only expand as the third power of time due to the speed of light limit. That means that the laws of physics do prohibit an indefinite exponential increase in energy use, baring new discoveries that look pretty unlikely.
Economic growth could theoretically last, the problem is that the system is no where near properly structured to not cause deliberate bubbles and bust. It is odd that only very few people understand what the fundamental cause of economic growth, bubbles, and bursts is. They can all be tied back to deliberate manipulation to edge one group higher at the expense of another. The trite saying is true, economics is not a zero sum game, but besides that being totally irrelevant and a red herring to disperse challenge, the economy is very much not an infinite system and directly tied to the extraction of resources, whether natural or human.
Natural brake for economy is when scammers that call themselves "socialists" come into play. They prey on people's desire to get rewarded for doing nothing. They promise to rob hardworking people of their income in exchange for votes.
The answer to this question is really simple. It's not complicated at all. Allow me to explain.
Finance has abstracted economics from the real world into mathematical magic. People get into these complicated debates about concepts, acronyms, abstractions and GDP, when the reality is right in front of your face.
Think about it: In what reality can economic growth continue indefinitely into infinity? In what reality is there an unlimited supply of goods to satisfy boundless demand?
Let me say unequivocally the answer to the question: can economic growth last?
Economic value is not tied solely to natural resources. It is tied to abstractions. Economic growth is itself an abstraction.
Most of the value that's produced in the world is a matter of language. Overcoming barriers to communication. That's not a finite resource, and we're nowhere near saturated in our ability to grow in this area.
> In what reality can economic growth continue indefinitely into infinity? In what reality is there an unlimited supply of goods to satisfy boundless demand?
There doesn't need to be an unlimited supply of anything except economic activity. Economic activity is defined more or less as any exchange of goods and services (including labour). If I decide to go to the pub and recite poetry, and someone decides to give me money for reciting poetry, we have economic activity.
Another example. Take a brand new model year 2015 automobile, and contrast to a 2014 model with the same badge. The 2015 will be priced higher. Why? Because we assume it's better - more technology, maybe more features. Even if both have never been driven off the lot. Another poster made the comparison between a 2010 and 2015 iPhone. Even if both are in the original packaging, there will be a price difference.
It's in this way that technology is factored in to economic growth. In the future, as long as technology increases (which it likely will), even if the output of raw material decreases, even if we don't pull out as many resources, economic activity can still increase in value.
> Finance has abstracted economics from the real world into mathematical magic.
To a certain degree, yes. Much like computing has abstracted transistors and electronic circuits into something that allows us to write plain English into an abstraction (HTML and such) that's interpreted through another abstraction (browser) that's implemented on top of another abstraction (OS) that's implemented with another abstraction (compiled language) over a language (assembly) that's a nicer façade over what the hardware actually interprets (machine language).
The language of Economics allows us to quantify what happens in the real world, and create abstractions to allow us to make sense of how it all works.
Buddy, abstractions aren't magic built on top of thin air. Abstractions can be built upon abstraction and can be built upon other abstractions but when you follow the supply chain all the way down to the logical conclusion you will hit a physical road block grounded in reality. Eventually there will be an abstraction that must be built on top of a concrete primitive.
What is this primitive thing at the end of the chain? Energy and material. Think about it. Your poet, in order to have the luxury of writing poetry instead of foraging for food must have physical requirements to assist in his writing of poetry. He must eat food, he must have shelter and materials to support his endeavor. When you give money away for poetry you are giving money away for concrete things. You are paying for his food, you are paying for his shelter, you are paying for his leisure time to allow him to practice his poetry. Food comes from plants, plants can only grow with sunlight... aka energy. Eventually the chain must end at a physical primitive.
Lets talk about a hypothetical island economy with a population of two people. Let's say these two idiots are poets. You cannot have an economy of two poets where both poets pay each other to recite poetry. The poets will eventually die of starvation. It's a mutually recursive abstraction that never ends and is unsustainable; An abstract infinite loop with no primitive at the root. TO fix: put a farmer on the island and have the farmer give food to the two poets in exchange for a recitation. Boom, there's a real economy. An economy of pure abstraction only exists in your imagination and even your imagination needs food for sustenance.
So when we talk about economics, when we talk about programming, we are not talking about magical abstractions built upon nothing. We are talking about reality. An economy will always be bounded by the physical limitations of the world because abstractions are built on top of the physical world itself, the two are one and the same thing.
Ironically the primitive in economics is the exact same primitive in the programming universe: Energy and material are the same thing as Procedure and State. The philosophical implications are profound. Even crazier is when you follow the chain in the programming universe you will find out that both state and procedure are abstractions on the same thing: Silicon and electricity. What is silicon and electricity? Material and energy. Yes that's right, not only is economics bounded by reality, but so is the world of programming, so is the concept of abstractions.
> What is this primitive thing at the end of the chain? Energy and material.
With nuclear fission power, we have a very large amount of energy available for the future. With nuclear fusion, potentially much more. As for materials, we can recycle most of them. And who's to say in the future we won't be mining asteroids?
I'm well aware that economics, in the end, is about raw materials, manpower, etc... After all, the first economic 'transactions' involved people cooperatively gathering food, building shelter, etc... (ie. you build a shelter and make a fire while I find us a rabbit to roast)
However there's nothing to say the future won't consist of a world powered by nuclear fusion (or some yet-to-be discovered method of energy production), where all labour is done by robots, where we're all given Star Trek-style 'credits' with which we pay each other to recite bad poetry.
Also keep in mind that economics didn't start with Keynes or Smith, or even Ibn Khaldun. The ancient Mesopotamians kept exhaustive records, had commodity-backed banknotes/tokens, units of precious metals (shekels), rules governing finance, and debt, etc... Modern economics isn't any different (fundamentally), we just now have more things to measure, and more abstractions to make sense of the endless complexity of a modern, global economy that has 7+ billion actors in it...
It might be interesting to think about the theoretical endpoint for farming. The number of workers needed went down dramatically when they were replaced by machines. In theory the machines could be made cheaper. What's left? The land and other physical resources like water. Land gets a certain amount of solar radiation that's converted into food. Available farmland goes down as it's built over, but that can't go on forever. Eventually, there's going to be an equilibrium since available sunlight is limited. Or we find another energy source (let's say nuclear) and need to figure out where to dump the heat. In the limit it's about global warming.
Contrast with entertainment. What theoretical constraints are there preventing all the entertainment you could possibly want being available for free? In the end it's not going to take a big solar panel to power your entertainment center. I'd bet on entertainment getting cheaper faster than anything else once AI really kicks in.
1. Energy use per capita cannot grow indefintely. - Agreed
2. The economy cannot grow without energy growth - Disagree (see chart in [0] shows that energy use per capita peaked in the 1970s and we most certainly have had growth since then)
3. Our current economic system is based on growth and would collapse if we didn't have growth. - Disagree (he just kind makes this assumption and doesn't go into details)
4. We should transition to a steady state economy - Disagree (Why should we stop growing now to avoid the potential problemof not growing in the future.)
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[ 3.1 ms ] story [ 180 ms ] threadGlobalization was an expansion-driven growth phase and we have reached the end of what it can do for global growth - yes there are regions that are still catching up with the rest of the wrold but barring Africa, their population is relatively small so their catch-up will not contribute to significant global growth.
We have transitioned into an innovation driven growth-phase now. We'll have to wait for it to start to sputter before we know what kind of expansion-driven growth we will see next.
I like the fact that the author thinks of "what comes after" because a lot of the green efforts that we are seeing are looking to prevent climate change/global warming and not enough of preparing for the eventuality that our preventive actions may fail and what would the world look like if we failed and how do we survive & benefit from that.
Same reason why China decided to completely ignore the environmental effects, if they had fewer energy sources, their growth wouldn't be as gigantic.
It's quite interesting what will happen with India and with countries of the African continent. When they start enjoying their increased standards of living, they might want to use more energy, currently they are just a tiny speck of the world energy use.
Maybe some of the now-emerging countries skip the oil/gas/coal phase entirely and go directly to renewables, in the same way that Africa skipped the landline and the traditional banking in favour of mobile phones and apps.
Growth of energy use is unsustainable, and that may mean economic growth is unsustainable.
Currently we are talking about endless massaged data from various sources generating a global composite temperature of +0.28 C (about 0.50 degrees Fahrenheit) above the 30-year average for August in an El Nino year.
http://wattsupwiththat.com/2015/09/11/global-temperature-rep....
Moreover - http://notrickszone.com/2015/09/09/spiegel-slams-sorrowful-s...
The best and most resilient example I know is the Black-Scholes equation - a framework to model option prices - based on a heat diffusion equation. Thing is, now it's never used with its original assumptions, but rather with a bunch of fixes. Oh, volatility isn't constant as we thought, let's add stochastic volatility. Oh, stock pricess are fat tailed and don't behave according to a geometric brownian motion, let's add discontinous jumps. Not to mention, that nobody uses historic volatility anymore. A hack of hack of a hack. So much, in fact, that the original elegant theory has just become a sort of convention, how everybody does their calculations.
I really don't understand the argument that laws that have been proven to work in one domain should work in another. I think it's a kind of quantitative mysticism.
Obviously the economy would be affected. But would it die forever?
1. Continued economic growth requires continued increased energy use.
2. Any energy source will eventually generate so much waste heat that the planet becomes uninhabitable.
3. Therefore, sustained economic growth is impossible.
How could the economy possibly plow through and ignore the physical limitations of the Earth? The author anticipates one might argue a larger portion of the economy goes to services of various points but suggests reasons this is implausible.
The article is not hardcore econophysics though, but basically a little bit of regression and then deference to physics without any economics.
I'm not sure what "quantitative mysticism" means, but I'm not proposing anything quite so social-science-waffle sounding.
The assumptions fundamentally aren't reasonable; they're considerably less reasonable than Malthus' arguments that economic growth could never outpace population growth in the first place, which were at least written just before world per capita output started to accelerate.
If economics isn't a hard enough science, then getting physicists to do the theorising instead doesn't seem to be helping ;-)
I look forward to a future where most of the economy is optional and I can walk away from it and retire in complete comfort. Hint, we're getting there and if you're not building real wealth you're going to miss it and be FORCED to play video games to pay me rent on the physical world you take up space in.
Buying Photoshop instead of using GIMP or Abercrombie instead of George consumes little or no more real resources, but by any regular measure of economic growth it's an increase in real output if people switch. Same applies to people buying shiny new Teslas that consume less real resources than the low-end Ford they used to drive. Or indeed, as I hinted I suspect will increasingly be the case in future, people spending sizeable proportions of their income on cures for chronic ailments that take an relatively trivial amount of energy to implement. Economic growth is fundamentally not measured in units of energy.
For my relaxing woodworking hobby I have a midrange table saw. In eternal economic growth I could improve my hobby by buying a much better saw, a giant cast iron table beast with 2 HP motor and a kilobuck fence system and kilobuck dust extraction (instead of my cheap hundred buck system) maybe given infinite money something better than current top of the line, or better than can currently be imagined, could be sold to me. Fundamentally there is a limit of the theoretical best imaginable table saw. At that point economic growth ceases. This also happens with cars and houses. It does not appear possible to design and build a car that is road legal better than a couple million dollars, given income inequality we should be able to charge $25M for a super car and there would be plenty of sales at that level, but engineers can't find a way to spend that much even on custom cars.
But you argue the perfect table saw could be value engineered to fail often. OK then, you bought yourself a couple more orders of magnitude of economic growth but still hit physical limits. Now I replace my saw every time I use it, heck, every cut I make. Eventually there comes a fundamental physical limit to how many boxed saws I can slide down my basement stairs. So you implement drone delivery of table saws. OK then we run into a limitation of living in a 3-d universe, where the lifespan of my table saws are so small I can't deliver them fast enough to make money producing more of them, and the waste heat is so high my skin burns.
Now at those fundamental physical limits, how do we increase economic activity?
There is another fundamental physical limit based on income inequality. If you take total income or wealth across the country and divide it equally, perhaps everyone in the USA could buy a table saw like mine, today, which sounds awesome, because fine carpentry is fun as an art form, etc. However we concentrate all our income and wealth at the top. And none of us (statistically) are at the top. Eventually like the last days of the Roman Republic we'll have all the wealth owned by one dude. And if Dude doesn't like carpentry as a hobby, and no one else can afford even the cheapest of table saws, then Dude can increase his income and wealth into perpetuity but table saw sales will drop to zero permanently, even if the plan was to eternally sustain economic growth by making and selling table saws. This is our medium term future. The economic problem with income inequality or our current return to feudalism is that the one dude at the top can't spend money fast enough or wisely enough to keep the economy alive, much less eternally growing. And if a detailed analysis of economic conditions shows that for a couple generations all we've been doing is transferring wealth upwards to the rich rather than actually being productive, then obviously that has to stop once there is no more wealth to extract from the peasants, even if for a couple decades, reports of economic activity look very busy. Its like pumping oil out of a well and thinking the well is bottomless, for a little while you can "create" oil and oil wealth out of nothingness, but eventually you run into a problem with that business model once the cheap oil is all pumped out.
Economic activity is just a way to keep score in the competition to use energy and resources ever faster, well, ever faster until it isn't anymore.
I think it's pretty ludicrous to suggest we'll reach the limits of the growth potential of human [conspicuous] consumption at any time in the foreseeable future, and frankly if it starts to look like a serious problem any time in the next five or so centuries we might even have enough disposable income to pool to create a non-debt/inflation based financing system so we don't lose all our savings. Assuming we still care about our savings. :-)
I actually think the tendency of wealth to concentrate which you've also mentioned is a bigger problem, but we already have large-scale direct and indirect redistribution of incomes and I don't see future electorates voting for the party that lets the [competent] descendants of todays' billionaires continue to accumulate all the wealth.
The question is what you can do with the saw. As you note, fine carpentry is an art form. There's no limit to the possible value of the art you could produce with the saw and other tools. There's no limit to the possible total value of the art that could exist in the world.
A finite earth can support a finite population which can use finite resources to employ a finite economy. I'm not sure what's difficult about that concept; especially since a zero-growth economy is not a new concept (it's called 'maturity' when applied to an ecological system).
You're also overlooking the rather obvious and important fact that the quality of different works varies tremendously. While it's true that appreciating art does require some time, the amount of value I receive in return, and therefore the price I'm willing to pay, is a function of (my perception of) the quality of the work. And it doesn't necessarily take me more time to experience a higher-quality work than a lower-quality one.
And after patent expiration, many of those technologies could become very cheap - because they are either dealing with information(i.e. labs on chip) which generally has moore's law like economics, or dealing with giving minute quantities of materials to people - and making that is either very cheap today - or synthetic biology would probably make it very cheap.
So i'm not sure healthcare will be a growth engine.But maybe living to 150 or forever will offer a lot of growth.
Once you start getting into these sorts of assumptions about trends and correlations, you really have to have a good understanding of all these inputs. They are all suspect to different degrees across different time horizons and scenarios.
What you really have when you put together these predictions is "Given A,B,C & D, this Y is likely to be whatever." That only works when you understand A,B,C & D quite well and keep them in your head. It's also bait for our biases and grand worldviews.
I had this massive argument 10 years ago with a politically active friend on the left. He was/is a sort of modern socialist-environmetalist. He brought up exactly this energy-gdp correlation and was extrapolating a log way into the future. It also played into his general sense that GDP growth is an unbecoming central goal for a society and that economic progress is at odds with the environment.
It's not a nonsensical perpective. That correlation is relevant. But, you need to get into the subtleties.
Even the concept of "economic growth" is an abstract thing. GDP as a measure of economic output is becoming less and less useful metric. Wikipedia consumption contributes nothing to GDP. Some kid torrenting game of thrones contributes nothing to GDP. These things have value, but monetary exchanges are not good proxies for them.
Even within the "energy intensive manufacturing" paradigm, an iphone's utility-to-energy cost ratio is a funky thing to try and fit in to the GDP concept which ultimately uses money to measure value. A 2015 iphone is worth more than a 2010 iphone. You can see this if you try to sell one and if you could go back to 2010 in time with a box of 2015 iphones you would see it as well. But beyond that, trying to do price adjustments (which are the basis of "keeping interest rate constant") on a rapidly developing technological product puts you in the weeds.
This complexity is exactly why these correlations and trends are interesting They cut through the messiness. I think we should still do this. But… you need to treat these in the same way you'd treat Kurzweil's theories. Interesting, but built on a lot of unknowns. Too many to make you too confident.
"...I had this massive argument 10 years ago with a politically active friend..."
Reminds me of a similar story. Worked with a guy many years ago who was a double major, math and physics, I think. Brilliant guy. At the time, he assured me that now was the time to get in the market and bet on oil prices going higher. Peak oil was here! Shortages and chaos were upon us.
I pointed out that peak oil had been called many times over the years. It was doubtful we were on that exact spot. In fact, some economists have even said that anything you can dig out of the ground is bound to go down in prices as extraction technology continues to mature.
He countered by showing me a study from the U.S. Defense Department (I believe), it showed that yes, indeed, oil was going nowhere but up. I pointed out various examples of this type of thinking failing in the past. He pointed out that things can't continue on forever. Draw a trend line. There's no way that line can continue. Does this discussion sound familiar?
We agreed to disagree, and I promised him that I would wait a few years and email him. We would revisit this discussion.
Several years passed. Oil was not through the roof. In fact, IIRC, it was about in the same spot as it was before. So I emailed him. I asked him how he felt about his earlier assessment.
I did not get a reply.
Since then, of course, we have the advent of fracking, and the clear possibility that the U.S. is going to end up as a petroleum exporter, at least for a while.
Faith is a fine thing. Heck, I'm a singularian, although I think we're looking at 300-500 years. But it's very important to be cognizant of those things you take on faith. Otherwise you end up having these long discussions in which your main defense is just repeating something along the lines of "science!" or "math!" over and over again.
That said, I think what Kurzweil does is interesting and valuable. In fact, being so stridently futurist and speculative makes it a lot more honest than a typical "think tank" economic scenario predictions. You go into it with a much more assumption challenging type of good skepticism and engage with the unknowns.
What makes you think 300-500 years?
If we're talking 300-500 years, I'm lost. Compare 2015 to 1515. Consider accelerating rate of change, I think 300-500 years takes us outside of any kind of timeline we can map historically.
But it's all just guesses, of course.
Of course, there have been impressive price fluctuation (One happening right now). But it's kind of expected in a highly complex system where technology, politics and financial crises interact in rather unpredictable ways. On average, I still think the trend is UP (and the "fracking miracle" will be a short lived spike). Peak Oil will happen (but predicting the date or dynamics inside a 20 year range is just as hard as predicting the timing and depth of a financial crisis).
[0] http://inflationdata.com/articles/charts/inflation-adjusted-...
Trying to measure the size of the economy "faithfully" is not possible. You can create abstractions like GDP that are useful where they are useful, but you can't treat them as solid concepts.
When the "IQ" debate was hot and contentious, people often ended up with a tautological definition that measured IQ is whatever IQ measures. This is because "intelligence" is not a solid concept and the test is not a direct measure of this fuzzy concept anyway. That doesn't mean IQ is meaningless. It has predictive power. It can serve as a goal (unless you game it and make it useless).
GDP is a measure of transactions, ultimately. That tends to correlate with the size of an economy and can be used for comparison, if everything is structurally similar. You can compare France to Sweden. If you are trying to compare the economic output of Monaco to Zimbabwe, GDP is not as good. If you are trying to compare the economy of today to the economy of 1836 or 2065, you're also in trouble. If you want to compare the economy of an alien civilization to ours, GDP won't work.
Referencing GDP (or anything else, this is just an inherently hard problem) in these contexts is trying to squeeze some useful information out of a very limited and buggy tool. You need to understand the subtleties of it. What it does well and poorly.
Most importantly, accept that our tools and therefore knowledge is limited.
As our economy hits more extremes of abundance vs. scarcity, decoupling of value mechanisms is a likely future step. Mainstream economic theory already has some accomodations for types of goods and externalities - it's not too radical to imagine a theory that recontextualizes them.
I think free energy in the sense that Facebook is free, is still a possibility. But, I think what we previously failed to envision is the depth of our consumption ability. If by energy, you mean the energy needs of a home in 1915, that's an achievable goal. But, the goalposts moved. Energy has been a constraint though, not the best example since we have't had good progress relative to other things.
Consider food though, the basic consumption good. In pre-industrialized times, calories so cheap that they're free would have been a "singularity" like end goal. "Free food" in the form of a box of grains with sufficient calories would be perfectly doable if people wanted to do it, <$100 per year.
But of course, we consume far more that $100 per year of food. It's just that calories are not a good measure of food anymore.
Education, at whatever quality can be delivered without a teacher will be free. Housing isn't on any kind of virtuous curve, that's a resilient cost.
Computers are getting close to "free." A Rasberry Pi is (on the scale we're talking about) essentially the same as a Macbook Pro. Even a fully cased and packaged laptop is moving towards free, at least in the sense that thumb drives are free.
On one hand, I do think a lot of things can get so "abundant" that economic models ultimately break down entirely. Anything that is entertainment, information, education can be free. Anything that's a physical manufactured good like underpants or iphones can get so cheap it might as well be free.
On the other, some things (housing) might prove more resilient to to accelerating change. Others things will discover levels of demand for more "quality". A 1996 cell phone for free is a bad deal relative to the $300 alternative. Basically, there are things we will want that still cost money. Another way to put this is demand distancing itself from "need." We need some stuff (food, water). Some stuff is a matter of definition (education). Some stuff (game of thrones) is squarely in the "want" bucket, but the want bucket produces economically identical demand.
That's debatable, because no one tears down a house and rebuilds an identical one.
* Was the old house livable? If not, then you haven't really wasted anything.
* Is the new house up to more rigid environmental standards?
* Does the new house take up more (less) space?
* Is the new house wired/piped in a different way?
etc.
There are also scenarios that break GDP but not homo economicus logic. What happens when a woman starts working and paying for childcare? Do you subtract the childcare she is no longer directly providing as negative GDP? Do you just add on this new service as growth, even though the kids are not getting and more hours of "childcare?" This is a real problem with data pre 1960s and post 1980s. GDP can't measure those.
That's the economic equivalent of bulldozing a house and building a new one. There's a surplus, economic or otherwise but there is an unmeasured destruction too, parenting hours are reduced. We only count paid work so when one increases at the expense of another, the GDP abstraction leaks.
What happens if important new products and services are free, like Wikipedia, Khan Academy, etc? What happens when you can buy a £500 android phone for £200? Do you do an inflation adjustment that counts the value of all £200 iphones produced @ £500?
The real world mixes these up in ways that GDP can't really handle.
The question for society is , does this even really matter? We never used to subject ourselves to economics and markets as the totalizing sphere of human achievement, it was one of several areas of social organization alongside community, politics, family, religion, etc. We only start caring about this stuff when we want to compute dubious universal ultility functions and the like.
In fact, a fairly important figure in "neoliberal" thought is Hayek. Hayek (and Hayekians) argue that not only is the economy difficult to quantify and describe formally, it is impossible. In his frameworks price and choice are conveyors for knowledge.
I would even say that the most serious hubris in this vein has been the Stalinist and Maoist "5 year plan" which aimed to quantify economies in accounting terms.
As for Hayek, I don't think he is unique in the view that price is about knowledge. While Hayek was the more readable and reasonable one between him and Von Mises, I'm aware the Austrians don't really believe one can scientifically study the economy, but I also think there is plenty of evidence that has refuted this: we can quantify and describe a large subset of the economy with predictive power.
The government could pay people to dig ditches and fill them back in, and that would contribute to the GDP even though it was a complete waste of effort and a net negative considering the opportunity costs.
Another good example could be: think about the cost spent every year for lawyers to write EULAs or liability waivers that nobody reads, or to file tax returns that comply with our super complicated tax code. If the underlying legal system was simpler and/or less friendly to these liability lawsuits, the same effect could be had without needing any of those legal/professional billable hours.
http://www.oecd.org/std/41746710.pdf
Giovannini (former OECD Chief Statistician) has this to say about the future of economic accounting:
Looking to the future, it is possible to identify certain trends in the demand for economic statistics that will presumably strengthen in the years to come. In the first place, demand will focus more and more on the services sector (which already accounts for over 70% of GDP in many developed countries), with new forms of production playing a more important part. The measurement of “intangible” activities will take on increased importance and this should bring about greater integration of economic statistics with social statistics: concepts such as those of human and social capital are already generating interest and becoming the subject of quantification, albeit still in embryonic form.
Unless you want to set a few boundaries to keep the debate about more prosaic matters then be prepared for a long night.
In fact, value is purely subjective. In other words, the value of 'Wikipedia consumption' is only what each individual places on it.
For example, someone may find Wikipedia valuable in pursuing his quest for greater knowledge, whereas someone else is completely uninterested in 'consuming' it (and doesn't see Wikipedia as valuable).
In a nutshell, the value of X is its subjectively perceived utility as a means towards an end.
See http://mises.org for more.
I'm not sure if we'll ever find a good proxy for how much information is worth as it is an extremely heterogeneous, intangible input that goes through a complex, unstructured, and not-fully-understood process (the human brain) in order to create value in the world that we can measure using money as a proxy - a company's revenue, for instance.
He says that growth is composed of two parts. One part depends on energy production/consumption and the other part does not -- If you don't like the causation ''energy consumption implies growth'', his theory still holds if you assume that the second part is more important than the first.
Because our ability to be energy-efficient is bounded (even if his numbers are imprecise it's difficult to argue against this -- as our stuff cannot be more than 100% efficient), it means that the part of growth that does not rely on energy must take a disproportionate share of the total growth if you look far enough into the future.
It precisely seems to me that the assumptions he makes are remarkably minimal.
I've understood the energy argument as central to the article. Hence the "causation" in my original comment.
You'll be delighted by Austrian Economics then: http://mises.org
They start from some axioms on how humans actually behave, and build everything on top of that.
Without increased energy use, vast swathes of the economy clearly could not exist. That is what he spends most of his time proving.
No, the author assumes energy as a prerequisite for economic activity - not a cause. That much is true. There are no significant economic activities that do not depend on energy. The author even suggests that more non-energy activity will be required to sustain economic growth and has a hard time with that.
Almost all of production in a modern economy comes from machines. Machines have been utilized to augment both manual and intellectual capacity. Machines require energy. Therefore our economy runs on energy.
Think about it. Why do most people have jobs sitting on their asses typing on a computer instead of searching for food and doing other obvious things related to survival? Because machines are doing the work for us! Because Energy!
Let's be real, it's really hard to find an occupation that doesn't involve an energy consuming machine.
Take for example: Food. Factory farms, tractors, pesticides all guzzle gasoline like crazy. People assume that if gasoline disappears, you can just start biking to work. The reality is, if gasoline disappears, people will begin to starve.
Another example: Big Data and IT. What do you think those servers are running on? Hopes and dreams or Energy? Take your pick.
The cities of america are constructed in ways so that the laborer must get in a car and consume a bunch of energy just to get his ass to the location where he actually does work... Our entire infrastructure is built around energy. It goes further then that, our urban infrastructure is built on the assumption that energy is limitless; suburban infrastructure relies on gasoline, once that's gone, so is suburbia.
Modern civilization and energy are intrinsically linked. The same way green house gasses and global warming are linked. There is no controversy. Period.
In short economic growth is Bounded by an upper limit and that upper limit is indeed energy.
Energy is a factor of production, just like labour, or commodities, or management. I can take another Totally Obvious Fact and say that growth is caused by the size of educated labour force... Assuming that energy is the defining factor of production either requires justification, or is just an assumption.
It is a big question if technology can solve all of our problems.
Technology is definitely a part of the solution but human mentality has to change. Most of the people care about their preferences and standards of living, they do not care to look, nor are they interested in participating in solving the problems of the global scale. When this is the case, it's quite hard to shift to something more sustainable.
Through my readings about sustainability I've always been left with a very weird feeling. I'm perfectly aware of what the subject is about, but I can't seem to find any solution that would divert us from the current path, and authors are mostly just commenting on the current situation, being themselves perplexed by the possible solutions.
Does this demonstrate that current, analogous predictions are false? Certainly lot. But Bayes theorem dictates that the similarity decreases the confidence that one should have in contemporary climate science.
I have neither the time nor the inclination to remain current on cutting-edge climate science. Whenever I check in, I find that the critics seem to be getting the better of the argument. But I profess no expertise.
I do, however, consider myself reasonably qualified to opine about the state of AGI research. And, despite more than a decade of trying, I have no idea when to forecast the emergence of AGI. I would not be shocked if it happened tomorrow, nor would I be surprised if it occurred 300 years from now — or not at all.
I am, however, confident that the emergence of AGI will radically alter the state of the earth, thereby rendering virtually all pre-AGI predictions worthless. The population trends of Africa mean little if some Western nation unleashes a digital demi-god capable of reshaping the earth in its image.
The IPCC's failure to account for this effect, which I believe in quite strongly, does not inspire confidence in the reliability of its other data. I do not, of course, mean to imply that it would be reasonable to expect an international panel on climate change to address the risks from artificial intelligence. But that is because there are so many different contingencies that it is silly to make projections so far into the future. It is not at all clear that an energy crisis is even the greatest existential threat that modern man faces.
I'd be surprised if it comes tomorrow. The leading scientists have little belief that their current methods could be easily adjusted for AGI. All of the leads in AGI currently can't even simulate the problem solving skills of C. elegans. There's not a single AGI project that accomplishes the same skills of a specialized model.
"If AGI doesn't happen, we predict [current predictions].
If AGI happens, who the hell knows?"
You can't account for something which can't be accounted for.
Sadly, this is not a trivial insight. The obstacles to clairvoyance privilege immediacy over wisdom, because it radically limits the number of possible permutations.
The solution to uncertainty is not an obsessive focus on one discrete risk, like anthropogenic climate change. Instead, it necessitates a focus on the factors that provide the most robust protection against a broad array of risks. Objectively, the single factor with the greatest relevance to the entire body of existential threats is economic growth or, at minimum, annual economic productive capacity, for it enables effective adaptive responses to myriad crises.
I would say that's because the obvious is assumed, so there's no need to advertise it. Nobody expects the IPCC prevision to hold if a singular event happens, so what would be the point of underlying that fact?
The solution to uncertainty is not an obsessive focus on one discrete risk, like anthropogenic climate change.
It's the Intergovernmental Panel on Climate Change, what do you expect them to focus on?
You wrote: "The IPCC's failure to account for this effect, which I believe in quite strongly, does not inspire confidence in the reliability of its other data."
But there is no reason for them to account for something that can't be accounted, and it makes no sense to criticize them for focusing on what they've been created to focus on.
In practice demand and size of the markets limit potential for growth more than physical limits. Population is important factor both in supply and demand.
Even if automation increases, people as the source of demand are important. Investing into microprocessor plant that supplies 10 billion people has different risk and profitability than building similar plant to supply demand from 5 billion.
Debt, interest and loans are not dependent on economic growth. Debt is fundamentally about reducing the latency between consumption and production; rather than having to wait until after you've produced something of value, you can consume some of that future production today, in exchange for promising to divert some of that future production. There's nothing here that requires the whole pie to keep on growing.
In other words, Fred can bring new wealth into the system, yes. If he defaults, then Ginger learns that a key assumption of her loan---that the wealth of the Fred/Ginger system would increase at time t+1---was wrong. Which is exactly my point: that our system of finance relies on the implicit assumption that the economy will grow.
My hunch is that this is the wrong question to ask. Tackling economical issues like this is like wanting to start working out and then spend all your time discussing the best(TM) fitness routine online. No amount of math will save us. After all those years of rapid economical and technological progress we have to acknowledge that it's the human factor we have to work on the most.
Economic growth is a tool and we can not use it very wisely as we haven't figured out our society's real needs all that well. We lack collective tacit knowledge so to speak. That what we can codify (at least at the moment) isn't enough to solve our problems.
But I think the author is right that a zero-growth economy should be the goal. Because only then resources of all kind could be perfectly allocated. However, this assumes that the perfect allocation of resources is a.) possible and b.) desirable.
A purported major factor in the collapse of Lehman Brothers was that their economical models failed to anticipate a dramatic drop in property prices because they didn't include data reaching far enough into the past.
Much of the machinery for large scale data analysis was developed in the context of trying to understand complex physical systems. Even basic linear regression has its roots in the study of celestial mechanics by scientists such as Laplace and Gauss. Von Neumann was the co-creator of game theory, John Nash proved its foundational result. Economics is not beyond the analytical abilities of physicists and mathematicians to investigate, although certainly they benefit from collaboration with domain experts to resolve basic misunderstandings.
Ignoring energy and entropy in a dynamical system does seem a bit curious. It's not really clear that GDP can be made both rigorous and meaningful in the sense of these thermodynamic terms. David Goodstein points out that oil companies haven't produced a drop of oil in their entire existence. They simply process the oil which biophysical forces produced over a hundred million years. This oil (and all other fossil fuels) will run out in something on the order of 100 years. After this, civilization will end. I find his prediction difficult to dismiss, although not a foregone conclusion. All the solutions to the problems Goodstein raises remain speculative.
You can't glibly dismiss Goodstein's analysis. He addresses this belief (canard) that we have hundreds of years of coal in the ground, or that the resource limitations which restrict the future of oil do not also apply to coal. To replace the energy, fuel, industrial and agricultural uses of oil, coal consumption would have to increase by at least 5x, with catastrophic environmental consequences. Goodstein also points out the unreliability of estimated reserves, which in many cases are political rather than scientific.
http://www.zmescience.com/research/us-navy-synthetic-jet-fue... US navy synthesizes jet fuel solely out of seawater; costs $3-6 gallon
Wind is already cost competitive with coal. Sure, if oil was going to run out in 10 years that would be a huge issue, but when we have 50+ years to deal with the issue and it's bound at ~3x current costs it's just not that huge of a problem.
PS: The navy is interested in this because shipping fuel around is a major issue for them where nuclear reactors can provide plenty of energy.
So, it's not so much about confidence, I think is rather hope for us as a species.
Several generations ago, some of my ancestors (my great grandparents) came here and bought their farmland for $10. Now I can barely buy a beer for 10 dollars. Yet we don't measure GDP in 1900 dollars, or in year 3000BC shekels.
Regardless, in many ways, my beer today IS worth more than a farm in 1900. My beer was made because of generations of farmers growing grain, building up their homesteads, brewers buying equipment and employed generations of employees, farming equipment improving efficiency, and everything else that goes into the supply chain. Simply put, the value of technological progress is built into current price levels.
Regardless, I did mention an 'idyllic' future. Obviously we'll be burning fossil fuel for the immediate future.
If we're at the stage of having super-dense energy sources and super-tech, couldn't we we use those to cool the planet effectively?
Use a heat pump to move that heat off-planet? Drop some icy asteroids in the seas? Take compressed hot atmosphere off-planet in super-blimps, run it through a heat exchanger on Titan and then bring it back?
Not if a big chunk of the growth comes from the entertainment industry (Netflix et al.)
The mistake here is to assume there is a hard link between nominal growth and energy use.
Finance has abstracted economics from the real world into mathematical magic. People get into these complicated debates about concepts, acronyms, abstractions and GDP, when the reality is right in front of your face.
Think about it: In what reality can economic growth continue indefinitely into infinity? In what reality is there an unlimited supply of goods to satisfy boundless demand?
Let me say unequivocally the answer to the question: can economic growth last?
NO.
Most of the value that's produced in the world is a matter of language. Overcoming barriers to communication. That's not a finite resource, and we're nowhere near saturated in our ability to grow in this area.
There doesn't need to be an unlimited supply of anything except economic activity. Economic activity is defined more or less as any exchange of goods and services (including labour). If I decide to go to the pub and recite poetry, and someone decides to give me money for reciting poetry, we have economic activity.
Another example. Take a brand new model year 2015 automobile, and contrast to a 2014 model with the same badge. The 2015 will be priced higher. Why? Because we assume it's better - more technology, maybe more features. Even if both have never been driven off the lot. Another poster made the comparison between a 2010 and 2015 iPhone. Even if both are in the original packaging, there will be a price difference.
It's in this way that technology is factored in to economic growth. In the future, as long as technology increases (which it likely will), even if the output of raw material decreases, even if we don't pull out as many resources, economic activity can still increase in value.
> Finance has abstracted economics from the real world into mathematical magic.
To a certain degree, yes. Much like computing has abstracted transistors and electronic circuits into something that allows us to write plain English into an abstraction (HTML and such) that's interpreted through another abstraction (browser) that's implemented on top of another abstraction (OS) that's implemented with another abstraction (compiled language) over a language (assembly) that's a nicer façade over what the hardware actually interprets (machine language).
The language of Economics allows us to quantify what happens in the real world, and create abstractions to allow us to make sense of how it all works.
What is this primitive thing at the end of the chain? Energy and material. Think about it. Your poet, in order to have the luxury of writing poetry instead of foraging for food must have physical requirements to assist in his writing of poetry. He must eat food, he must have shelter and materials to support his endeavor. When you give money away for poetry you are giving money away for concrete things. You are paying for his food, you are paying for his shelter, you are paying for his leisure time to allow him to practice his poetry. Food comes from plants, plants can only grow with sunlight... aka energy. Eventually the chain must end at a physical primitive.
Lets talk about a hypothetical island economy with a population of two people. Let's say these two idiots are poets. You cannot have an economy of two poets where both poets pay each other to recite poetry. The poets will eventually die of starvation. It's a mutually recursive abstraction that never ends and is unsustainable; An abstract infinite loop with no primitive at the root. TO fix: put a farmer on the island and have the farmer give food to the two poets in exchange for a recitation. Boom, there's a real economy. An economy of pure abstraction only exists in your imagination and even your imagination needs food for sustenance.
So when we talk about economics, when we talk about programming, we are not talking about magical abstractions built upon nothing. We are talking about reality. An economy will always be bounded by the physical limitations of the world because abstractions are built on top of the physical world itself, the two are one and the same thing.
Ironically the primitive in economics is the exact same primitive in the programming universe: Energy and material are the same thing as Procedure and State. The philosophical implications are profound. Even crazier is when you follow the chain in the programming universe you will find out that both state and procedure are abstractions on the same thing: Silicon and electricity. What is silicon and electricity? Material and energy. Yes that's right, not only is economics bounded by reality, but so is the world of programming, so is the concept of abstractions.
With nuclear fission power, we have a very large amount of energy available for the future. With nuclear fusion, potentially much more. As for materials, we can recycle most of them. And who's to say in the future we won't be mining asteroids?
I'm well aware that economics, in the end, is about raw materials, manpower, etc... After all, the first economic 'transactions' involved people cooperatively gathering food, building shelter, etc... (ie. you build a shelter and make a fire while I find us a rabbit to roast)
However there's nothing to say the future won't consist of a world powered by nuclear fusion (or some yet-to-be discovered method of energy production), where all labour is done by robots, where we're all given Star Trek-style 'credits' with which we pay each other to recite bad poetry.
Also keep in mind that economics didn't start with Keynes or Smith, or even Ibn Khaldun. The ancient Mesopotamians kept exhaustive records, had commodity-backed banknotes/tokens, units of precious metals (shekels), rules governing finance, and debt, etc... Modern economics isn't any different (fundamentally), we just now have more things to measure, and more abstractions to make sense of the endless complexity of a modern, global economy that has 7+ billion actors in it...
Contrast with entertainment. What theoretical constraints are there preventing all the entertainment you could possibly want being available for free? In the end it's not going to take a big solar panel to power your entertainment center. I'd bet on entertainment getting cheaper faster than anything else once AI really kicks in.
It might be a while before physics wins, though.
1. Energy use per capita cannot grow indefintely. - Agreed
2. The economy cannot grow without energy growth - Disagree (see chart in [0] shows that energy use per capita peaked in the 1970s and we most certainly have had growth since then)
3. Our current economic system is based on growth and would collapse if we didn't have growth. - Disagree (he just kind makes this assumption and doesn't go into details)
4. We should transition to a steady state economy - Disagree (Why should we stop growing now to avoid the potential problemof not growing in the future.)
[0] - http://www.npr.org/sections/money/2013/04/10/176801719/two-c...