Once Again, Economic Growth Cannot Continue Because Of Resource Limitations


We have another entrant in the argument over economic growth. It simply cannot continue because of resource use. There’s a limited amount of Earth, a limit to the resources which can be used to feed economic growth, therefore economic growth must stop. If we are to assume that economic growth is indeed a physical process, something that requires the processing of physical items, then this is true at some limitation, of course it is. There’s a limited number of copper atoms on the planet, we cannot use, absent leaving the planet, more than this number of copper atoms.

The problem with the argument however is the assumption that economic growth is indeed a physical process requiring those physical resources to be consumed. GDP is a measure of value, economic growth is an increase in the value being generated. This is not something subject to physical restrictions:

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Worth noting that this is by a professor of anthropology, not an economist.

But the promise of green growth turns out to have been based more on wishful thinking than on evidence. In the years since the Rio conference, three major empirical studies have arrived at the same rather troubling conclusion: Even under the best conditions, absolute decoupling of GDP from resource use is not possible on a global scale.

Given that they start from the wrong definitions they’ve not even tested the idea itself.

A team of scientists led by the German researcher Monika Dittrich first raised doubts in 2012. The group ran a sophisticated computer model that predicted what would happen to global resource use if economic growth continued on its current trajectory, increasing at about 2 to 3 percent per year. It found that human consumption of natural resources (including fish, livestock, forests, metals, minerals, and fossil fuels) would rise from 70 billion metric tons per year in 2012 to 180 billion metric tons per year by 2050. For reference, a sustainable level of resource use is about 50 billion metric tons per year—a boundary we breached back in 2000.

Becoming more efficient in resource use just delays the day and so the other two examinations have found as well.

So, we’ve entirely run out of dodos these days. Yet economic growth continues. Therefore economic growth does not depend upon a supply of dodos to be converted or processed, does it?

This is also true of any specific physical resource. In fact, it’s true of all physical resources. None of them are the binding limitation upon how we can add value. Indeed, imagine a world in which resource use remains entirely static. Even, if you wish, a world in net new abstraction of resources is nil. We can still have economic growth by figuring out new methods of adding value to that more limited set of resources that we can and do use.

This is, roughly enough, Herman Daly’s distinction between quantitative growth and qualitative growth. Even if quantitative growth, the processing of ever more natural resources, isn’t possible it’s still entirely possible – probable to certain given human beings – to have qualitative such. Us making better and more valuable things out of that same resource base.

The problem here is simply one of the original definitions. The economist says that growth is an increase in GDP – in a narrow sense at least. GDP is value added. We can still add value even with restrictions upon resources, thus we can still have growth.

Yet the studies suggest that even if we do everything right, decoupling economic growth with resource use will remain elusive and our environmental problems will continue to worsen.

Preventing that outcome will require a whole new paradigm. High taxes and technological innovation will help, but they’re not going to be enough. The only realistic shot humanity has at averting ecological collapse is to impose hard caps on resource use, as the economist Daniel O’Neill recently proposed. Such caps, enforced by national governments or by international treaties, could ensure that we do not extract more from the land and the seas than the Earth can safely regenerate.

All of which is more than somewhat irrelevant, isn’t it? They’re insisting that we face hard physical limits to growth. So why must we have laws against such growth? The hard physical limits already exist, don’t they. Thus the law is an irrelevance. Or, alternatively, we don’t face such limits but they wish to impose them by law. If we’ve not got the limits then why are we trying to impose them?

It’s also true that the proposed solution doesn’t work even in its own terms:

But there’s no escaping the obvious conclusion. Ultimately, bringing our civilization back within planetary boundaries is going to require that we liberate ourselves from our dependence on economic growth—starting with rich nations. This might sound scarier than it really is. Ending growth doesn’t mean shutting down economic activity—it simply means that next year we can’t produce and consume more than we are doing this year. It might also mean shrinking certain sectors that are particularly damaging to our ecology and that are unnecessary for human flourishing, such as advertising, commuting, and single-use products.

The claim is that economic activity uses up natural resources. If this is true then having a larger economy isn’t possible because there are no more natural resources to use. OK. But more economic activity in 2020 is, in that resource use terms, just the same as economic activity in 2030 or 2230. If producing stuff permanently uses up resources then we’re going to run out of resources sooner or later anyway. We cannot continue to have an economy at all for at some point we’re going to run out of those resources. Limiting the size of the economy in time doesn’t help as the economy is infinite across time. So no more economic activity now doesn’t work anyway.

Sure, we can say that certain resources can and do regenerate – say, fish in fishing grounds. But then no economist is going to argue with that sort of limitation to growth anyway. We’ve even whole theories talking about it, commons problems and the rest, Nobels awarded for thinking about such problems.

The contention that we cannot have more economic growth because natural resources is wrong, simply and purely, for economic activity is the adding of value. Resource availability is a constraint on certain forms of economic activity and the volume of that sort, most certainly, but not a hard constraint upon the basic idea of adding value itself.

And think at a much more basic level for a moment. Economics is the study of the allocation of scarce resources. The argument here is that natural resources are becoming increasingly scarce. When considering the effects of this who do you want to listen to, the anthropologists of the economists, the experts or not the experts in the allocation of scarce resources?