
Can Economic Growth Last? - ryan_j_naughton
http://physics.ucsd.edu/do-the-math/2011/07/can-economic-growth-last/
======
jevgeni
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.

~~~
netcan
That's the nail on the head.

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.

~~~
Joeri
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.

~~~
rayiner
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.

~~~
collyw
So why do we bother with it?

------
barrkel
_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.

~~~
vannevar
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.

~~~
mrep
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.

~~~
vannevar
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.

------
dougabug
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.

~~~
Retric
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.

~~~
dougabug
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.

~~~
Retric
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.

[http://www.zmescience.com/research/us-navy-synthetic-jet-
fue...](http://www.zmescience.com/research/us-navy-synthetic-jet-fuel-
seawater-0423432/) _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.

------
Machiq
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.

------
skimpycompiler
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.

------
skybrian
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.

It might be a while before physics wins, though.

------
kfk
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.

~~~
emodendroket
What makes you so confident? The author does address the idea that somehow
technology might fix our problems.

~~~
kfk
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.

~~~
emodendroket
Well if growth is both the only way and unsustainable then I guess we're in
trouble.

------
wahsd
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.

------
Mikeb85
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.

~~~
slackson
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.

~~~
Mikeb85
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.

------
nabla9
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.

------
crimsonalucard
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?

NO.

~~~
Mikeb85
> 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.

~~~
crimsonalucard
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.

~~~
Mikeb85
> 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...

------
jbert
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?

~~~
Symmetry
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.

------
cJ0th
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.

------
JamesBarney
It seems to me like the TLDR of the article is

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...](http://www.npr.org/sections/money/2013/04/10/176801719/two-
centuries-of-energy-in-america-in-four-graphs)

------
keithwhor
To answer the title: Yes, because population growth can, in theory, continue
indefinitely. Assuming, of course, that we're not restricted to one planet. :)

~~~
crimsonalucard
No theory states that population growth can continue indefinitely. Growth is
not only bounded by space availability, but energy as well.

~~~
keithwhor
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.

------
zachrose
For perspective, if could invest one cent in a fund that grew at 2% annually
over the last 2000 years, you would have 1.58 quadrillion dollars today.

------
amelius
> Can Economic Growth Last?

Not if a big chunk of the growth comes from the entertainment industry
(Netflix et al.)

------
kaonashi
Nominally, yes.

The mistake here is to assume there is a hard link between nominal growth and
energy use.

------
elcct
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.

------
bakhy
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
;)

------
ClintEhrlich
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.

~~~
skimpycompiler
> _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.

~~~
ClintEhrlich
>There's not a single [public] AGI project that accomplishes >the same skills
of a specialized model.

