So what are the implications of the recent rise in commodity prices? It is, as I said, a sign that we’re living in a finite world, one in which resource constraints are becoming increasingly binding. This won’t bring an end to economic growth, let alone a descent into Mad Max-style collapse. It will require that we gradually change the way we live, adapting our economy and our lifestyles to the reality of more expensive resources.I wish I believed this but I can't convince myself. Endless growth at a more than infinitesimal rate R on a finite planet implies endless decline in impacts per unit of wealth at a rate
But that’s for the future. Right now, rising commodity prices are basically the result of global recovery. They have no bearing, one way or another, on U.S. monetary policy. For this is a global story; at a fundamental level, it’s not about us.
And the problem isn't just academic. For the entire 9 billion people to have a ceiling below what two generations of growth in the west implies yields a fifty-fold decline in impact per unit wealth in the same period. (*)
I wonder what economists are thinking. Krugman is a smart man and a decent one, but how he manages to square this circle completely escapes me.
I think we can live happily (and pretty much capitalistically if that means that much to you) ever after if we lose the idea of growth. We don't need to lose capitalism to reach sustainability. But it looks to me more and more like we need to lose economic theory as it exists.
(*) Update: and even that assumes that the current impacts are sustainable!