Tuesday 9 November 2021

Infinite growth on a finite planet: an explainer

Anyone who thinks that you can have infinite growth on a planet with finite resources is either a madman or an economist - Sir David Attenborough

Do you think we can get infinite growth on a finite planet? Personally, I would not say “yes” to this question. I think economists answer this question badly as there is just so much room for misinterpretation. So here is how I would answer it…

I do not believe you can continue to use finite resources forever. They are, by definition, of limited quantity. Ultimately, we need to shift away from fossil fuels and reduce CO2 emissions to help fight climate change.

We often think about economic growth as using up materials. We take some of these finite resources and use them to create something else, something new. In my mind, I picture industrialisation, huge factories being built out of solid concrete puffing out huge plumes of smoke.

And throughout most of recent history, resources have been a key input in driving economic growth. Economists call this extensive growth - when you use more physical inputs to get more output.

If you were a farmer back in the Middle Ages and wanted to grow more vegetables, you could just plant some more in a neighbouring field. More resources, more output. At some point though all the neighbouring fields become occupied by other farmers.

Farmers found out by simply rotating where crops were planted each season, they were able to get more output with the same amount of inputs. This is what economists call intensive growth and what we often refer to as productivity.

At this point you may say, this is all very well, but we still need to use some physical inputs to get more outputs. Even if we make a coal plant more efficient, we still need to put at least some coal in it.

So this is where we get to the crux of what growth actually is. The way we often measure it, GDP (Gross domestic product), is based on summing up the value of everything that is sold in the economy. If I buy a beer and a pack of crisps in a pub, I am adding to GDP (I like to do my bit for the economy) and using up physical recourses.

But I also like to go to concerts. When I pay to see someone play music, is that using any physical inputs? You could say, of course it does because I travelled there by train, and they needed electricity to plug in their Yamaha CS-80 synthesiser.

But what I am really paying for here is listening to the musician play. Even if we lived in a society that banned travel and the use of electricity, I may still want to pay to see someone sing even if I had to walk there. So if we were somehow able to create sustainable resource use (and that’s a big if), then in the future we could get “infinite” growth: as long as people want things, you will get “growth”.

This is what economists are thinking of when they say “yes” to the question posed by Sir David Attenborough. But to me, it is sort of feels like a technicality – a quirk of how we calculate growth.

The more pressing question is climate change. If we continue at the same levels of C02 emission there will be negative consequence for the climate. This is why we should care about the amount of physical inputs we are using, even if we are getting more intensive growth out of them.

This is why to some, the Degrowth movement is appealing: in order to decreases carbon emissions, we need to decrease growth. However, I would prefer to rephrase this a different way: we need to decrease carbon emissions, even if this costs economic growth.

Economic growth is not the root cause of climate change, it is carbon emissions. Focusing our attention on growth - with all its weird idiosyncrasies – leads you down a blind alley.

Let’s say that in order to decreases growth we ban the use of air travel overnight. Do I think this will causes a recession - yes. Do I think it will have a long-term decrease on growth – I don’t know. The reason I do not know, is once you have banned the use of air travel, the incentive to innovate new ways to travel is huge. Banning air travel does not stop people wanting to see the world. And let’s say, that some miraculous way to travel quickly to other countries is invented without producing carbon – would we want to ban that as well?

Even in my example society where electricity and transport were banned – it may take you to the level of what growth was at in the Middle Ages but it is highly unlikely to stop growth from that particular level. People will try and innovate around those constraints and invent new ways of finding out what people want.

Now you could try and shift those wants and preferences like the Degrowth movement by arguing we can be happier if we buy less stuff. And I agree with this argument in many ways: often we focus on the material as opposed to the things that really make us happy like spending time with family. But stuff can also help me spend more time with family, like helping me wash the dishes via a dishwasher. And if we are able to find ways for people to buy as much stuff as they want without harming the environment, then who I am to tell others what will make them happy?

The crucial thing here is that we should be willing to sacrifice some economic growth to help fight climate change - if that’s what it comes to. Economic growth is not an end to itself. We care about other things than incomes, as the pandemic made clear.

This is why most economists are in favour of carbon taxes. Personally, I am in favour of carbon taxes to the extent that it may decrease future growth. And it may be that proponents of Degrowth would go further than me in terms of how high these taxes should be. But the focus needs to move away from hypothetical arguments about growth (ironically one of the objectives of Degrowth is to stop our obsession with growth) and to one on actual policies to help fight climate change. Because at the moment, I think a lot of people are talking past each other and it's not very productive.

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