"System change is now inevitable. Either because we do something about it, or because we will be hit by climate change. '...

"We need to develop economic models that are fit for purpose. The current economic frameworks, the ones that dominate our governments, these frameworks... the current economic frameworks, the neoclassical, the market frameworks, can deal with small changes. It can tell you the difference, if a sock company puts up the price of socks, what the demand for socks will be. It cannot tell you about the sorts of system level changes we are talking about here. We would not use an understanding of laminar flow in fluid dynamics to understand turbulent flow. So why is it we are using marginal economics, small incremental change economics, to understand system level changes?"

Saturday, April 25, 2009

Obama doesn't mess with the Growth Imperative

The Washington Post a few weeks back had a wonderful interview with President Obama. I am sure I am not the only one to be experiencing a tremendous feeling of gratitude and relief to be hearing such coherent and thoughtful answers to difficult questions.

I find one thing troubling though. While Obama speaks of sustainability on more than one occasion, he suggests that "growth" is his core mission. As far as I know, nobody has ever come up with a way to reconcile sustainability and growth.
The one message I want to send to the American people is that on all these fronts my consistent bottom line is how do we make sure that the American people can work, have a decent income, look after their kids, and we can grow the economy. That’s my criteria. I don’t have an ideological agenda in how we’re approaching it.
It would help, perhaps, if one could identify the quantity that one could cause to grow indefinitely in some form other than currency.

I think that sustainable growth, if possible, would be the least socially disruptive idea, hence the most politically accessible. It's easy to see the appeal to politicians.

But I don't know what it means, in any sense that is actually possible. I wish somebody would explain it.


David B. Benson said...

Sustain growth in what?

I don't understand how economists measure growth, but growth in human understanding and wisdom is certainly sustainable for some time to come...

PaulSchick said...

"But I don't know what it means..."Oh, maybe that isn't so hard. Exponential growth of material things forever is surely impossible in this universe. But then again, on current physical theory, forever itself is of no practical interest or importance, because forever seems destined to contain at most, insentient photons, neutrinos, and/or whatever of quasi-infinite wavelength.

The practical question for a politician or anyone else is whether growth really needs to slow down or stop in any time-frame of practical interest, i.e. now. The obvious answer to that is "no", until some force majeure intervenes in a manner that is widely perceived as decisive. After all, all sorts of people have been raising every conceivable manner of scare and alarum from time immemorial, so we've heard it all before ad nauseam. Yawn.

Keep in mind that nothing clearly out of the ordinary, or even important in that sense, has yet happened except within computer simulations. More people are still living longer than ever before even in some of the more awful places. Oh, maybe there are vague hints emanating from the cycling of ice shelves thousands of miles beyond the back end of beyond, but those are almost as abstract and remote as, say, Barnard's Star.

tidal said...

This is not quite as simple as saying that we can have a "i'll write a song and trade it for your poem" economy. The issue of "dematerializing" our economies is very challenging.

w.r.t. "we must be a long way from limits"...

Most people "get" that if we have an economy that is growing GDP at, say, 3% p.a., then it doubles every 24 years. So, 24 years hence, GDP is twice the initial level. But often we go math-dead when thinking about economics... because we tend to ignore the integral - i.e. the space under the curve. Over that same 24-year time frame, the total amount of output/production/consumption equals the SUM of ALL output/prod/consumption in ALL of prior history. Assuming no efficiency gains, globally that could imply that, say, over the next 24 years we will consume as much copper, nickel, iron, oil, wheat, water, forests, fish, etc., as we have in all of recorded history. And then the same AGAIN during 2033-2057.

Even if you assume prodigious effeciency gains on material throughput, as long as you compound that at a positive rate greater than even 1%, you hit limits much sooner than most people realize. And it's likely going to be on some bottleneck resource (water? cheap energy?) rather than on some broad limit.

But, to Paul's point, yeah, the "growth" aspect of this problem will probably never coincide with, say, practical political terms. That's the challenge. Because the "absolute" aspect will, at some point, inevitably coincide. And that ain't as distant as faraway stars. I wish it was.

Dano said...

The prevalence of Wall St folks in the BHO cabinet does not bode well for weaning us off the growth teat. We must bow to that master. I, personally, don't think we'll stop with that fantasy until the hard or soft landing takes place - not soon, but in our children's lifetimes.



Michael Tobis said...

I respond to Paul Schick at length in another posting.

Marion Delgado said...

All I can come up with:

We are moving people to Mars, space stations, Io, etc. at a very rapid pace, keeping up with growth, and supporting it with space mining.

As a bonus, a lot of people die from cancer en route (GDP++) and a lot more are sterilized or can't produce viable offspring.

We should probably ban automation, though.