I often see statements in the news from economists saying things like “only 0.2% growth reported, which might have bad effects on the economy”. In my eyes infinite growth is simply impossible when we have finite resources, or is that a misconception from my part?
Edit: thank you for all the detailed an in-depth answers! Learned a lot of new things 🙂
In: 96
Imagine an “economy” of two people. One really likes to take care of their appearance and does not care much for sports. The other person doesn’t care about cosmetics or their appearance much, but loves to play sports–American football in particular.
Now suppose the person who doesn’t care about sports owns a football, and the person who loves football owns a makeup kit. If you were to survey the state of this two-person economy by asking each how much value on a scale of 1-10 each person has, you might get results like this:
Makeup kit: 1
Football: 3
Total market value: 4
Value per person: 2
Okay, now what if these two trade their items? Now each has something that they value more. Another quick survey might look like:
Makeup kit: 7
Football: 9
Total market value: 16
Value per person: 8
Just from some simple trade, this entire economy QUADRUPLED in value! Now this is obviously a small and singular example, but hopefully you can extrapolate this same idea to bigger and more complex economies. The take away: trade builds value. A healthy economy is a growing one.
One counter point you might have to this is “what is the likelihood that the sports fan would get makeup and the other person a football and not the other way to begin with?” The truth is, this is actually more often the way it works. A baker, for example, might have tons of bread products all the time. The relative value of some bread rolls to a baker is probably pretty low. But what about a custom-tailored suit? Maybe that would be more valuable.
Now look at a tailor by trade: likely has a few suits they have customized and really like and they don’t need any more. But are they fed? How much is a roll worth to a tailor?
We use money here as an intermediary. So a single custom-tailored suit equals several bread rolls in value, but the basic ideas and concepts are the same. People often have an abundance of one good or service and a lack of others. Trade grows value in the economy 🙂
Okay, now to the last part of your question: our resources aren’t finite. Or at least how you’re probably thinking. In a small example again, imagine a single person. This person can farm some land and raise livestock. Sure, the crops need to be rotated to keep the land fertile, but it is not hard to imagine a single person farming enough fruits, vegetables, eggs, meats, dairy products, etc. to sustain themself over a lifetime. Water recycles itself through the water cycle. A single person could easily have “infinite” resources here on Earth or, more correctly, infinitely renewable resources. Even the farmed plants could sequester and convert more CO2 than the person exhales in their lifetime! It is also not hard to imagine that a single person could farm enough for more than just themself. This is the case with our economy and the surplus is traded (more value, yay!). There are practices, however, that trend a single resource down towards zero. It is often easier to do this, which is why sustainable practices weren’t our first goal, but now we are moving, as a society, towards sustainable and renewable practices.
Now, there is some finality to resources. I’d argue we only have a few billion years left for Earth in particular and several trillion more (I think) until the heat death of the whole universe, but it’s not something that will ever really “run out” over the course of projected human existence.
I typed this all up on my phone, so I apologize for any errors. I’m happy to discuss this more; I love the concept of an infinitely growing economy! Not everyone understands how it’s possible, but I truly believe it is ☺️
I hope this helped answer your question 🙏
Think in more abstract terms. People exchange goods (including non-durable goods, services, labor) when both parties think they’ll be better off, so usually the more exchange, the better. We can measure that in terms of something easily quantifiable like money, and find out that this month, after all sorts of exchanges of all kinds, people’s amount of stuff grew 1.3% on average, or the amount of money exchanged grew 0.6%, etc.
There doesn’t need to be any more goods in existence, merely redistributing existing goods to people who want them more can cause growth (up to a point). This might seem counterintuitive, but consider that such redistribution is not random – people in the state after redistribution has happened don’t want to go back, but people before want the redistribution to happen.
Finally, not all production is like farming or carpentry. Some new goods don’t need you to consume a lot of finite resources (time, energy, specific matter, human attention) to be transformed into way more valuable goods. For example, one person can write an e-book for 10000 people to enjoy, and the only costs are very tiny storage and energy costs, infrastructure maintenance costs, author’s time costs, search costs etc. while the benefits are worth it (many people eagerly pay 5 dollars for a book, sometimes even when they know how to pirate them). Once we have enough books that you’d only pay 1/10000th of the sub-cent amounts it takes to deliver one person a book, and only for the very best books, that’s when growth stops.
Important to emphasize here that economists have a certain perspective which is a neoliberal capitalist view of the economy and growth, which has to do with money, mostly.
There are, of course, many other measures of growth and wellness that governments don’t record or give a flying fuck about, at all.
Eli5: economists have a very narrow view of growth and when they say no growth = bad, it means a very specific thing.
A ton of ways to answer this question but very very ELi5 answer:
Big changes are hard. Remember when we moved across the country, all at once? That was hard right? So, the government doesn’t want things to change a lot. A little change, 1 or 2% is enough.
But we also want more, not less. We want a little bit more, but no so much is causes problems. So the government tries to get 1 or 2% inflation rather than deflation.
Of course, it’s very complex and we don’t always manage that goal. Sometimes it’s 5% or -5%. But we aim to get 2%.
More growth equals more wealth.
More wealth helps with things like more hip replacements for 70 year olds that a society in the past couldn’t have funded, even if they had the medical tech.
When a society doesn’t have excess, people starve. My grandparents were lucky in The Depression in New Zealand when there were no unemployment benefits as they had a small farm and jobs. Other people literally had nothing because society could not afford it. (And, admittedly, people had trouble with the concept of borrowing money at a government level to pay for welfare.)
More wealth for a society is always better than less. It is how people use that wealth, at an individual level, and how a society negotiates to apply that wealth, which is where the argument will never stop.
Value is, at least partially, subjective, meaning that at least some portion of growth can be subjective, and not take resources.
For instance, let’s say that 100 people could:
1. stay at home and be bored for an hour
2. pay $1 for me to tell them a story
In scenario 2, I contribute $100 to the economy. Did I need to consume more?
It’s true that I had to consume some, say, food and air to be able to tell the story. However I need that regardless, so perhaps no more extra consumption than there would have been otherwise.
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Sometimes, value can be gained from re-arranging existing things. This is, in a sense, what ‘technology’ is, and it often relates to efficiency.
For instance, let’s say that we can either:
1. use an old computer system that uses $100 of electricity to do calculations slowly
2. use a new computer system that uses $100 of electricity to do double the number of calculations in the same amount of time.
If those calculations have value, then if we can work out how to do #2, then we are doubling the value we generate from that electricity, hence growth without more consumption.
[Alternatively, maybe we do the same number of calculations, but with half the electricity, hence equal output with less consumption.]
This might require upgrading the computer systems (which is some consumption), but if we’d run the computers and use a lot of electricity, this might end up being more value for less resources used.
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Sometimes, value exists is not being harnessed, and we can grow by harnessing some value we were missing out on. (This is similar to the ‘technology’ example above, and arguably just repeats it.)
e.g. maybe we can either
1. Let sunlight hit the ground
2. Absorb sunlight into a solar panel (or plants, or a heating system)
The sun is shining either way, and the solar panel provides more value than warming the ground does. If we don’t consume it, the ground will consume it, so us using it doesn’t increase consumption.
So the economy can grow if we build solar panels, and this might mean we consume less overall (we do consume materials to build the solar panels, but the electricity generated might mean burning less coal, for instance).
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That’s not to say that we therefore aren’t over-consuming things. We very well might be, and we might be doing so more and more each year.
There certainly are some forms of economic growth that do require more consumption!
However, not *all* growth is *inherently* using more consumption in an unsustainable manner. *Some* forms of growth may sustainable, and sometimes might even be able to conserve resources.
Importantly, what are the downsides of an economy continuously growing when resources are finite. The need for economic sustainability might also need to be discussed.
We’ve spent most of human history working on logistical problems in some capacity. That’s why your shoes don’t cost a month’s wage, and that’s why you can afford to eat meat or fresh fruit on a random Tuesday.
Hey 5yo, so many things we do to make the world better assumes growth of trade.
My job is a trade of my time for the boss’s money. My grocery trip is a trade of my money for the supermarket’s ice cream. The supermarket trades their money to Ben & Jerry’s company for the ice cream. Ben & Jerry’s trades their money for the farmer’s milk. The farmer trades his money for what my boss produced, and so on.
Why will I work extra hard unless I think that will help me get paid more in the future? Why will any boss give me a raise or hire me at all unless he thinks that will grow his business profit in the future? Why will the supermarket improve their selection of ice cream unless they think that will grow their profit in the future? Why will Ben & Jerry’s develop a new flavor or better packaging unless they think it will grow their profit in the future? Why will the farmer work at making more and better milk unless he thinks it will grow his profit in the future?
When we don’t think we will be rewarded with growth, we try less, and that leads to others trying less, and it becomes a vicious cycle. Examples can be found where there is some artificial limit to growth, such as an employee that is at the pay cap, apartment quality *and* renter quality after rent is controlled by law, small towns where population is not growing, economies of communist nations where extra labor is not rewarded, and video games that has run out of bigger rewards.
To not grow is to die, in economy, as in life. Grow well, my 5yo!
“Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.” -Jeff Bezos
https://noteworthynonsense.com/blog/08/2020/bezos-amazon-letter-2016-day1
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