55 thoughts on “Sandpit

  1. So, following on from JQ’s piece about GDP, I’ve been reading lots of stuff lately about “no-growth” economics, such as Tim Jackson’s “Prosperity Without Growth”, NEF’s “Growth Isn’t Possible” and ACF’s “Better than Growth”. The short version of these is that GDP is a terrible way of measuring genuine progress and well-being, and that as long as we focus on GDP growth, we’re destined to run out of resources before long and the whole world will go to hell in a hand-basket as we grow ourselves into oblivion. The “Impossible Hamster” video sums this up nicely: http://www.youtube.com/watch?v=Sqwd_u6HkMo

    I’m a scientist, not an economist, and I can see compelling biophysical reasons why a transition to a no-growth economy is pretty important, and indeed the only feasible solution to the impending ecological crisis. The shenanigans at Rio+20, where “sustainability” and even “sustainable development” has now become “sustained growth” in much of the text, hardly suggests we’re taking this issue seriously.

    I wonder, however, about how a country going it alone in such a transition would fare as the rest of the world sails along the GDP-growth-at-all-costs path. This is one factor left out by most proponents of the no-growth approach. I expect that country would quickly find itself in the poor country list and getting left behind as others progress with technological advancement, to the point where the purpose of the transition has been defeated.

    But I haven’t come across any other real criticisms of the better-than-growth model, once you’ve accepted the certain consequences of infinite growth in a closed system. I suppose the “technology will save us” argument is one, but technology hasn’t done a lot to overcome human nature so far, so I don’t necessarily see it happening any time soon.

    Can a shift to no-growth economics work? Will it see an improvement in quality of life? Beyond saying I’m in favour of preserving the biosphere and that there should be more equality, I’m trying to avoid ideological positions about capitalism, etc.


  2. If you developed a cure for cancer, would you flush it down the drain and burn all records of how to make it? If the answer is no, then you probably wouldn’t like no-growth economics. Either that or the people pushing no growth economics have a different definition of economic growth than I have.

  3. @Ronald Brak
    Maybe no-growth-in-consumption-of-natural-resources economics? If you develop some new technology that makes better use of existing resources, then THAT kind of growth is good.

  4. I’m planning a big piece on this, sometime soon, roughly along the lines suggested by Sam

  5. Sam, I think some people might be thinking that zero economic growth means zero making the planet worse, but I can’t really see how they arrived at that conclusion. I think that rather than think their way to it, they must have jumped there.

  6. @Ronald Brak
    Couldn’t agree more. I strongly support prices on carbon to internalize the environmental costs of economic activity, but I think the “no growth’ people are totally wrong.

    I have carried on about this before. It seems as if they misunderstand the growth models, and believe that a 1-3% cost of climate change adaption cancels with 1-3% economic growth. This then somehow becomes advocacy for eliminating growth.

    Sam, why not just opt for the standard economic view of maximizing output subject to the internalization of external economic costs?

  7. @Dr Nick

    As suggested by Ronald Brak, no growth economics don’t translate to zero damage to the biosphere. I don’t know a proper name for it, but the goal should be ‘growth not in the expense of environment’ economics instead of no growth unless we’re talking about issues such as world population, then no growth is arguably better than growth.

    A transition to a goal that is not ‘growth at all cost’ can be a positive step in aiming for sustainable development. However one of the main problem in the current situation of the global economy is debt obligations.

    Given the current level of public and private debt (not necessarily a bad thing under growth economics), ‘growth at all cost’ economics actually makes the debt cheaper to service, especially if they are overseas debt as growth generates increases in income via either real increase or inflation. If a debt is an overseas debt, the interest rate may not change even if there is domestic inflation as long as the exchange rate is constant thus making debt cheaper to service over time. For domestic debts, as long as the market interest rate is lower than your income growth (hardly ever happens for people in the lower income quintile), the debt also becomes cheaper.

    While debt servicing is still possible under ‘no growth’ economics, it is becomes more expensive because of interest rate. No financial insitution will lend you money if they receive any benefit in the future, especially if the lender’s economy have domestic inflation. However I can be missing quite a lot of other things here under the need of ‘growth at all cost’ economics.

  8. Corrections: “No financial insitution will lend you money if they receive any benefit in the future”

    Should be “No financial insitution will lend you money if they don’t receive any benefit in the future”

  9. Yes we need stuff that creates wealth- imagination and mental effort is what’s missing with the current neolib mindset, all we have is sly paper shuffling and wealth transference, usually from those that need a bit of money to the Gina Rineharts, Marc Roussels etc; the rent seekers.

  10. Given our nature and the unfortunate way we are headed, it is clear we will not solve the growth problem by our own actions. That is to say, a human engineered and human managed transition to a steady physical state economy (with ongoing knowledge and tech growth) will not happen.

    The only alternative is that external forces (the forces of the physical and biological world) will stop our growth when further growth becomes physically and biologically impossible.

  11. @Ronald Brak
    Well I can’t speak for those people. I advocate “maximise per capita economic growth consistent with zero making the planet (and society) worse.”

    NickR, I’m not sure I have a well-formed response for you, but I’ll offer three confused thought bubbles. They are all to be read in isolation from one another, since they might not agree among themselves!

    There’s probably not much real disagreement between me and you. Indefinite growth in natural resource use causes total (and certain) catastrophe. Since catastrophe really just means “very high cost”, it seems to me that “properly internalising costs” leads to the same policy outcome as “zero growth in natural resource use.” At the very least, I think the former implies a leveling off in growth in natural resource use at some point. For some resources (such as the ability of the atmosphere to absorb CO2), that that point is in the past, and not the future.

    Pricing environmental costs is problematic. Do you only count the negative impacts on the rest of the human economy (like when a factory pollutes a river with a fisheries industry)? There’s a lot of disagreement about the intrinsic worth of wild spaces, and the intrinsic cost of species extinction. I know attempts have been to put this on an objective footing with population surveys of community attitudes and such. It’s my understanding that the value people place on these things varies across orders of magnitude according to pre-question priming, so those surveys are pretty well worthless.

    I have a general bias against irreversible decisions. Slowing down growth now and protecting the environment is reversible; if we change our mind in the future we can always ramp things back up again. Going for growth now means we don’t leave our descendants any choice about how much environment they want. If we initially destroy a natural asset because we believe the intrinsic cost of a particular kind of environmental loss is low, but then change our mind, that’s too bad for future us. Imagine a kid in a hundred years time saying “Gee great grandad, I’m so glad you thought 1c cheaper butter was worth the felling of Borneo’s rainforest to make way for palm oil. I would have liked to have seen an orangutan.” That’s an extreme case, and I’m not accusing you personally of setting environmental costs too low, but it makes my point that the “standard economic view” can lead to regret about overthusiastic destruction.

  12. Sam @12, to your well thought out points I’d add the difficulties in relation to extremely improbable but potentially catastrophic future events which are rendered less extremely improbable by environmental change. How does economics value the costs of the “expected event” arising from the increase in such risks against the benefits forgone due to action to ensure the risks remain extremely improbable? You’d recall that this is one of the arguments that was had about Nick Stern’s methodology in 2006, and it was also raised by Garnaut in 2008-2009, and by JQ here.

  13. There are not necessarily resource limits to economic growth on finite Earth. We didn’t run out of grazing room for horses, transistors replaced valves and then further shrank to fit onto smaller and smaller pieces of silicon chip, and copper for electricity and communications cabling is substitutable by aluminium and fibreoptics (amongst others).

    A problem for sustainability is that the greater our wealth and economic power the greater our capacity to harm ourselves and the planet. That will be even more true into the future as world GDP increases. But already today we wield the power to destroy forests, rivers and fisheries. We wouldn’t have made it this far over the past few centuries were we as a species not capable of thinking beyond what’s simplistically measured by GDP.

  14. Growth is not the problem. Growth without trashing the environment is possible. In the short run maybe you can get more or faster growth by ignoring environmental costs, but even the stupidest among us will find, that in the long run,we will pay a cost in growth for our short term follies. Or maybe we will all be gone by then, as some seem to (wishfully) think.

  15. Then the mess will be somebody else’s problem. But as we know, due to discounting, they don’t matter. Or is that, we don’t care?

  16. @frankis


    I think we should be strictly agnostic about how much growth is possible without destroying the environment. On the one hand, we have the miraculous and unpredictable nature of human invention. On the other, we have hard thermodynamic limits on the efficiency of physical systems. We none of us have a crystal ball here, and the past is only an imperfect guide to the future.

    I’d like to have an economic system that welcomed any technology-led (non destructive) growth, but which didn’t require it. Specifically, I’d like a system which could be stable and could provide full employment even in the absence of any growth at all. I worry that capitalism (even with a mixed economy) is not such a system.

  17. @Sam
    Sam – I agree we probably differ very little in our views on this. However if we say “no growth in resource use” that implicitly places a whole lot of value judgements on say, the trade-off between health care (which partially depends on GDP) and the value of various rainforest species.

    It is not as if just specifying a general rule gets around the problem of valuing various aspects of the world, rather it just covers up the fact that we are doing it in the first place.
    At least we should make sure that our values are internally consistent with each other. So if we value a unit of biodiversity more than a unit of income in one circumstance, we should make sure that we are not doing the opposite in some other context.

    As far as I can tell having a blanket rule such as no increase in resource consumption only has merit if it coincides with the result we would obtain with correct internalization of environmental costs.

  18. With genetic engineering, or mutagenic pollution we can have growth, get rid of some of the more annoying existing species, and a the saame time increase biodiversity.

    Win, Win, all aaround.!

  19. We have several billion years before we have to worry about the second law, if at all.

  20. @Freelander
    The second law of thermodynamics is well and truly with us now. It’s one of the universe’s most important physical principle, and is a vital part of the design of all heat engines. In the 1930s for instance, average refrigerator compressors were 30% of maximum Carnot efficiency. Today we’ve doubled that to 60% Carnot. We’re not going to double it again though, because 100% Carnot is by definition the highest you can go. Why not? Because of the second law.

  21. The second law applies to the closed system of the universe. As for us we as a species will likely have long gone, long before all useable energy is gone.

  22. The second law is taken far too seriously, anyway. Being of the nature of a statistical trick.

  23. Gee, and God calls you God I’m sure. Looks like the ignorant unaware of their own ignorance strikes again! The human species always a source of unintended amusement.

  24. By the way, maths, statistics and philosophy would assist in obtaining a more than superficial appreciation of the second law and its multiple manifestations.

  25. @Sam
    Are you thinking Sam of something like the energy cost of resource extraction when you mention the 2nd Law? I’d be a little on the optimistic side of agnostic over the lower limit of our environmental cost of growth but of course that’s with all else equal and wisely implemented, something itself only approachable not attainable and prone to various errors and accidents from time to time. We’re not doing too well at the moment in Australia on things like river conservation and fossil fuel use, for two examples. When I’m feeling optimistic in this way I’m also tacitly assuming that world population will continue leveling off toward a reasonable upper limit, as the developed world and China seem to have done. In this picture I see renewable energy supplies and nuclear, the recycling of transformed resources (eg metal recycling) and probably a leveling off also of the materials intensity of a high quality of life. For instance I could imagine two children born today to an obese meat-guzzling corporate executive who travels by heavy 4WD between office and McMansion, and who jets around the place as much as possible for fun, growing up to value different things in life. That should make it easier to live within natural limits in a healthy and sustainedly diverse and complex ecosphere.

  26. And you have done none of these. Thank you Freelander, for reminding me why I don’t come to the sandpit much.

  27. Sorry @frankis , that reply was obviously meant for Freelander. Yes, I too am a technological optimist about humanity’s prospects for a happy and comfortable life, especially if income can be shared more equally.

    The thermodynamic limits I was thinking about are (for instance) the energy cost of smelting ore, the necessary minimum transfer of heat from high temperature sources to low ones in order to do useful work – that sort of thing. A lot of our postwar technology-led growth has come about by improving the efficiency of these processes, but due to thermodynamics (which does more than predicting the ultimate heat death of the universe despite what Freelander says) there are definite limits to these improvements.

  28. @Ronald Brak

    The concept of “economic growth” is a bad metaphor run amok. Behind it there is a false sense of unity and machine-like functional integration. Beneath the aggregation of selected transactions performed by the GDP, though, is morass of dissimilar events, some of which cancel each other out.

    It isn’t simply a matter of adding apples, oranges and bananas but also of ignoring that some of those bananas are, in fact, anti-anti-bananas and some of the oranges are simply artificial commercial surrogates for uncountable (by definition) domestic oranges. Category errors piled on fallacies of composition wrapped up in a misplaced notion of concreteness.

    From period to period, “the economy” consists of a radically different composition and it would be foolish to privilege an arbitrary measure of size over a critical examination of that composition. Growth economics is foolish. The problem with non-growth economics is that it often takes “growth” at its word and assumes that the problems associated with growth can be better addressed by stopping the growth. But “growth” is not the problem because, in effect, there is no such thing. We become entangled in a debate about unicorns in which the League for the Abolishment of Unicorns is pitted against the Society for the Protection of Unicorns. Forget the unicorns. Growth is a bad metaphor. And it is getting worse.

    It would be nice if we could distinguish between “without growth” and degrowth or anti-growth. It would be even nicer if we could distinguish between abandoning the concept of growth and abandoning the presumed “thing” that concept refers to. It seems, though, that once we have invented one of these phantasmagorical demons, we can’t escape them. It has gotten so bad that some people think we only need to find a replacement for GDP so that we can truly measure the phantom.

  29. The achievements have not been the simple result of increasing efficiency but have been achieved only because we have used more and more usable energy, and there is plenty more available to be used. So your restriction is wiith the greatest respect nonsense.

  30. @NickR
    Sorry NickR, I didn’t see your reply till now. While I agree we should always “just charge the real price,” in practical terms it is impossible to know what that price is. The rough heuristic “don’t make the natural environment worse” has less intellectual rigor, but is easier and more practical to achieve, and probably comes close to your idealized optimum.

    Consistency in decision-making is a good ideal to strive for, but not really that important, and impossible to achieve in a world of changing governments and public opinion. I’d be prepared to put up with quite a lot of inconsistency if it caused less net environmental damage.

    It’s true that GDP has a partial connection to health care, but comparisons of life expectancy between (for instance) Cuba and the USA shows that it’s fairly tenuous. I’d be more in favour of paying for health care by curbing conspicuous consumption than increasing natural resource extraction rates. There are some trade-offs with the environment, but I think they’re overblown.

  31. @Sam
    Sure – but what if it is not close to the optimal value? As you have said there is a lot of uncertainty here and the true value could differ greatly on either side. If our best estimate of the optimal pollution path (accounting for risk aversion, uncertainty and path dependence and the like) overlaps with such a simple rule then I am happy to use the heuristic. Although then we have no material disagreement.

    If not then I think you would agree we are better to use the more analytical approach.
    The reason why I am making a big deal out of this is that ecological economists seem to frequently use these very rough ad hoc heuristics without ever talking about the implicit economics. In some cases I am not sure they understand the implicit economics, which (if correct) makes the work pretty much useless.

    For example I read ‘Prosperity without Growth’ a year or two ago and (if my memory serves me correctly) there was not a single reference to the term “externality” in the index. This was odd given that the book was entirely focused on this issue.

    As environmentalists are often characterized as economically illiterate, my view is that environmental policy should be as solidly grounded in economics as possible. This should help dispel the notion that the policy is made by hippies who don’t know what they are doing.

  32. Evolution is wrong because a crocodile has never given birth to a crocoduck. Now admittedly, no biologist has ever claimed that a crocodile needs to give birth to a crocoduck, or even hatch one, for evolution to be correct, but learning what biologists actually think takes effort or worse, might require me to change my mind, so I’ll just stick to my own personal idea of what evolution is and argue from that because it’s easier.

  33. @NickR
    Conservationists are regularly accused of lacking objectivity and analytical skills. This is often fair. The counter-claim against economists is that they mistake their model for reality, that their “hard numbers” are a mirage, that their hyper-rationalist position is merely a futile Victorian quest for objectivity where none exists.

    You talk about the “correct price” of a given unit of environmental destruction as though that price exists as a hard number somewhere in a platonic heaven, and that it’s discoverable by a sufficiently dedicated and intelligent scientist. Certainly that’s reasonable for the anthropocentric cost of pollution (I mentioned before the impact of a factory on a fishing industry), but what about intrinsic and aesthetic costs? I don’t know of any way to scientifically work out such a number.

    For me personally, the intrinsic price of environmental destruction in Australia is the lowest that would achieve no further net environmental destruction. How can anyone say my subjective inclination is irrational?

  34. @Dr Nick

    Can a shift to no-growth economics work?


    I’m trying to avoid ideological positions about capitalism, etc.

    Then the answer is no.

    You cannot shift to no-growth given the political, ideological, cultural, and economic positions created by capitalism.

  35. And there is no real need to move to zero growth. A switch to clean energy sources would not be the end of growth. Neither would ceasing our environmental pillage.

  36. Thanks peeps, interesting discussion, especially @Sam and @NickR .

    @Chris Warren

    I’m not sure I agree. Ideology gives us answers like “yes it can work, because I’m a hippie and I think we should all holds hands” or “no it can’t work, because I’m a conservative orthodox economist and this idea frightens me”. There can be a critique of capitalism that is not ideological, and I think that critique, with environmental concerns in mind, typically leads to the need for much less or no economic growth. Hence reports such as Prosperity Without Growth.

    I’m not denying the unlikelihood of it happening, but I’m curious about the extent to which (and the manner in which) society could continue to function without economic growth. @Sandwichman makes a good point that perhaps we shouldn’t be either pro- or anti- growth, but rather pro-wellbeing, and see what paths might get us there. ie. define the goal rather than the process.

    Anyway, looking forward to JQ’s post on the subject.

  37. @Dr Nick

    Ideology gives us answers like “yes it can work, because I’m a hippie and I think we should all holds hands” or “no it can’t work, because I’m a conservative orthodox economist and this idea frightens me”.

    These statements are “Ideology” and are either false or true depending on the accuracy of your undestanding of the underlying objective reality.

    This underlying reality is (currently) “capitalism”.

    So understanding both ‘growth mania’ and ‘ideology’ demand understanding this ‘capitalism’.

    There is no point defining goals without first properlying understanding process. This process is entirely embedded in the underlying reality – currently capitalism. It is pretty well established that the ‘means corrupts ends’ – so we must start with goals (not my term, but good enough).

    So it all comes down to understanding capitalism – not because of ideology, but simply because this is the world in which we live.

  38. @Chris Warren

    Chris Warren says; “You cannot shift to no-growth given the political, ideological, cultural, and economic positions created by capitalism.”

    This, in itself, is correct within the sphere of political economy. There can be no voluntary, democratic and pre-emptive move to a no-growth system so long as capitalism remains our mode of production. However, there can and will be an involuntary shift to no-growth forced upon capitalism by the limits to growth.

    This shift to no-growth and indeed to either controlled de-growth or chaotic collapse will destroy capitalism as the processes unfold. A capitalist system will be unable to function economically under these conditions and unable to maintain formal or effective political legitimacy (it never had moral legitimacy) in the face of the revolutionary forces unleashed as the bulk of citizens face first a gross disappointment in expectations and then poverty and mass starvation.

    I’ll finish with a couple of quotes which put it so well there is no point in me paraphrasing.

    “Capitalism is premised upon unlimited growth. It follows, therefore, that if we have come to the limits of growth we have come to the limits of capitalism. The absolute end of growth is the absolute end of capitalism.” – the Existentialist Cowboy.

    “As both food and nonrenewable resources become harder to obtain in this (future) simulated world, capital is diverted to producing more of them. That leaves less output to be invested in basic capital growth.

    “Finally investment cannot keep up with depreciation (this is physical investment and depreciation, not monetary). The economy cannot stop putting its capital into the agriculture and resource sectors; if it did the scarcity of food, materials, and fuels would restrict production still more. So the industrial capital plant begins to decline, taking with it the service and agricultural sectors, which have become dependent upon industrial inputs. For a short time the situation is especially serious, because the population keeps rising, due to the lags inherent in the age structure and in the process of social adjustment. Finally population too begins to decrease, as the death rate is driven upward by lack of food and health services.”

  39. If we don’t wake up finally, in relation to the environment, we won’t have to worry about growth because it won’t be sustained. There will be a collapse. And then,maybe if we’re lucky, growth again but from a substantially reduced base. Who knows what state an environmental collapse might reduce us too. Or even, if our species will weather the change?

  40. Growth of what?

    If one looks at the basic data that enters the calculation of ‘economic growth’ (change in GDP or NNI) then one observes it is the change in the aggregate monetary value of invoices written in the course of market transactions. So, depending on the starting point, ‘economic growth’ can be observed for no other reason than a change in the social arrangments of economic activities.

  41. Ernestine @44, that’s true enough given the conventional definition of economic growth.

    The sticking point, in terms of sustainability, is whether actual economic growth is being decoupled, or can be decoupled, from resource throughput and environmental impacts per unit of growth at a rate faster than the growth in the aggregate of units of growth, and whether this rate of decoupling can be achieved and sustained before certain crucial ecological, biophysical and/or resource thresholds are crossed.

    As I understand the work of people such as Tim Dickson, Paul Gilding and the New Economics Foundation, the decoupling we have achieved falls short of this and will not be achieved before critical thresholds are reached.

  42. Bring back Birdy at Catallaxy (BbBaC} @ 45. My severe reservations about the macro-economic framework, to which ‘economic growth’ belongs, are, I assume, well established on this blog-site.

    The problem you describe makes sense to me for some regions in the ‘global economy’, eg the EU and the USA. It is not generally applicable in the ‘global economy’ because of vastly different degrees of the penetration of ‘markets’ to organise economic activity. In some local economies within the EU there is a long tradition to consider the sustainablility of the environment as part of Economics (eg Germany) and there are versions thereof and emerging traditions in this direction (France, Italy, the UK, to name a few). The USA is not leading in this area. I see this as the fundamental problem in the ‘growth vs austerity’ macro-economic discourse.

    It seems to me to be difficult from the outset to link global policies, such as ghg emission reduction, to macro-economic variables such as GDP. But this is what was done.

    IMHO, a much closer link between the natural sciences and economics (not macro, except for budget estimates) is desirable.

  43. Making water straight from the tap become perceived as too risky to drink so that people pay for bottled water is rightly recognized as a contribution to economic well-being. Economic statistics don’t lie!

  44. Of course, economists, despite strident efforts, have never quite cornered the market in nonsense. And although economists, with or without any training, have been leading the field in talking nonsense about climate change, there have been notable contributions from others.

    Talking of cornering markets, I see Rupert is casting aspersions labelling a certain NGO, no not the pope’s mob, as creepy and perhaps evil. One must bow to his expertise is such matters. (Difficult to tell whether the role of the emperor in Star Wars was based on him or Benedict XVI.)

    But back to nonsense – just remember. There is no such thing as a Nobel Prize in economics, so while economists can be accused of talking nonsense, they can never accurately be accused of being a Nobel Prize winner talking nonsense.

  45. “There is no such thing as a Nobel Prize in economics, so while economists can be accused of talking nonsense, they can never accurately be accused of being a Nobel Prize winner talking nonsense.”

    Good one.

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